RURAL MARKETING DEFINITION Market: Market means not a particular market place in which things are bought and

sold but the whole of any region in which buyers and sellers are in such a free intercourse with one another that the prices of the same goods tend to equality, easily and quickly.-Cournot Marketing: Marketing as a process by which goods and services are exchanged and their value is determined in terms of money prices. H. E. Mitchell Agricultural Marketing: According to National Commission on Agriculture XII Report Agricultural marketing is the process which starts with a decision to produce a suitable farm commodity or product & it involves all aspects of market structure or systems, both functional and institutional, based on technical and economic considerations and include pre and post harvest operations like assembling, grading, storage, transportation, and distribution. Historical Perspective of Agricultural Marketing:

Historical perspective of agricultural marketing is mainly divided in to four periods they are as fallows: 1. Ancient period 2. Medieval period 3. Colonial period 4. Post independence/ modern period Ancient period: During the ancient period barter system was present where people used to exchange their goods or commodities in terms of another commodity. Kautilya in Arthashastra has mentioned that trade, commerce and finance formed the basis of the state. Medieval period: During the medieval period the main four kingdoms were: a. Delhi Sultans Dynasty. b. Mughal Dynasty. c. Vijayanagar kingdom. d. Peshwas Regime.

Delhi Sultans Dynasty: Internal trade: Were of two kind, namely; (i) Costal trade, and (ii) Inland trade External trade: Was mainly between four countries i.e. Afghanistan, Central Asia, Persia and Iraq. Trade centers: were situated at Delhi, Banaras, Allahabad, Ajmer, Pune, and the towns on highways like Agra, Patna, Ahmedabad, Barhampur, etc. Main commodities: Food grains, spices and sugar were the main commodities for the export Mughal Dynasty: Mughal controlled the sea borne trade in Indian marine territories right from eastern coast of Africa up to the straits of Marucca. There where mainly four outlets of sea Cambay, Malabar, Coromandal coast and Bengal coast. Main commodities: rice, sugar, edible oils, fat and spices, commercial crops like silk and sandalwood had also a large market.

 Internal trade: during the Mughal period was of three kinds, namely, Coastal trade - Cochin to Cambay Riverine trade - through Ganga - Jamuna River and Bengal delta. Surface trade - from North region to central province. Market centers: Kanpur, Agra, Delhi, Patna, etc. Vijaynagar Kingdom: External trade: Portugal, Kuwait and Egypt Major commodities: husked and cleaned rice, palm, sugar, coconut, fruits, tobacco, spices etc. Internal trade: were of three kinds: Costal trade- Cambay to Cochin Reiverine trade- through Godavari, Krishna, Tungabhadra, Kauvery. Surface trade- Cambay, Bhatkal, Mangalore, Malbar, Cochin and Calicut etc. Trade centers: Musalipatanam, Calicut, etc. Major Commodities: rice, coconut, edible oil, jaggery and other commodities. Peshwas Regime:

 External trade: China, Afghanistan and Persia. Internal trade: Was carried out through water and land Main commodities: sugar, spices, dry fruits, and food grains. Trade centers: Poona, Satara, Kolhpur, Nasik, Solapur, Kalyan and Miraj. Colonial period: The Colonial Administration converted the traditional payment to the State, in the form of a proportion of actual produce in kind, into a fixed payment of land revenue in the form of cash. The land revenue was calculated to be 5% of gross produce per acre in Central Provinces, 7% in Berar, 7% to 13% in Delhi & Bombay and 20% Gujrat. Zamindari system was introduced during this period. This all led to debt traps to the poor farmers. Brokers and dalals came in to existence between the farmer and the consumer. Post independence/ modern period: Five-year plan was introduced: First five year plan:

Regulated markets were established in Bombay, Madras, Punjab, Hyderabad, Mysore and Madhya Pradesh where the management of these markets was vested in the committees in which growers (farmers) were also represented. In this plan the main thrust was laid on cooperative marketing and its aim was to have minimum 425 regulated markets in India. Second five year plan: To recognize the existing system so as to secure for farmer his due share of price paid by customer and sub serve the needs of planned development. Total agriculture produce markets were 2500 out of which 725 were regulated markets. Third five year plan: Bring remaining markets to regulation, and Expand grading program for the commodities. Fourth fie year plan: Aim to improve agriculture market system and In interest of producer the measure tasks undertaken were developments of road, market yards and grading units. Fifth five year plan:

Development of agriculture marketing through cooperatives. The main thrust here was of establishing Cooperative Marketing System. Sixth five year plan: The main thrust was on Further expansion of regulated markets in terms of both more markets and more commodities to be brought under the scope of regulation. Strength and stream lining the arrangement for enforcement to ensure regulated system of open auction, trade practices and margins of intermediaries. Development of rural markets and potential markets. Seventh five year plan: Further expansion of regulated markets in terms of area and commodities. Eighth five year plan: Strength of marketing infrastructure with special reference to perishable commodities. RURAL MARKET PROFILE Profile of Rural Market can be studied as two topics: 1. Rural consumer

2. Rural demand, its size and composition 1. RURAL CONSUMER: a. Size of rural consumer population Rural population Urban Population Majority of the population of India still exist in the Rural Area itself. States like Uttar Pradesh, Madhya Pradesh, Rajasthan and Kerala have > 80% of the population in the rural areas only. While, States like Bihar and Orissa still have > 90% in the rural area. b. Consumer Characteristics: Low purchasing power Low standard of living Low per capita income 1971 80% 20% 1981 76.3% 23.7% 1991 76% 24%

 Low literacy level Low economic and social position Tradition bound community Religion, culture and even superstition c. Location Pattern Urban: Population concentrated in 3200 cities & towns Rural: Population scattered over 576000 villages. 6300 villages have population more than 5000 persons More than 55% villages have population of 500 or less people More than 1.5 lakh or nearly 25% of the villages have population of 200 or less. Inference: Rural demand is scattered over a large area. d. Literacy level: Rural India 23% literacy as compared with 36% of whole country In absolute numbers 11.5 crore of literate people are in Rural India compared with 12 crore in urban India. Every year 60 lakh is getting added to the literate population of rural India.

e. Rural income: Evidently, rural prosperity and the discretionary income with the rural consumer are directly tied with agricultural prosperity because, nearly, 60% of rural income is from Agriculture. Inference: Rural Demand is Seasonal and Festival linked. f. Rural savings: The commercial and co-operative banks have been marketing the saving habit in the rural areas for quite some years. 70% of rural households are saving and majority of them belong to salary earners and self-employees non -farmers. 2. SIZE AND COMPOSITION OF RURAL DEMAND: Size of Rural market in non-food consumption items has been increasing from Rs. 5000 crores in 1969-70 to Rs. 22000 crores in 1993-94. (Size of market at current prices) Composition of demand: Many new products have entered the consumption basket of rural consumer. Product categories like cooking utensils, packaged tea, ornament or jewellery, bathing soaps, washing soaps, detergents, etc.

 As per an IMRB study, more than 60% of the villages in India now have shops stocking soaps, detergents, packaged tea and batteries. There has also been a rapid growth in consumption of Agri-inputs : Between 1971 and 1991 consumption of fertilizers grew at an annual compound growth rate of 10%. Pesticide consumption grew at compounded rate of 12%. Tractors - 15%. Pumps and Tube wells 11%. FEATURES / PROFILE OF RURAL MARKET 1. Large and Scattered Market: The rural market of India is very large, consisting of >600 million consumers, scattered / spread over 5,76,000 villages. In terms of business generated too, it is a big market; 22,000 crore rupees worth of non-food consumer goods are being sold per year. No. of consumers

Large is in terms of Business 2. Heterogeneous Market: The relative status of the rural areas of different states differs. Parameters on which they differ are Health and education facilities, nature of facilities, availability of public transport, electricity, TV transmission, banks, post offices, water supply etc. IMRB study reveals that an average village in India has 33 development index points, Keralas average Is 88; Bihars average is just 22; while MP, Rajasthan and UP are close to Bihar; and states like Maharashtra, Haryana, Karnataka range between 40 and so. 3. Demand, Seasonal and Agriculture dependent: The basic occupation of people in Rural Indian is Agriculture and agriculture is seasonal. Rural people have money only during the harvest period and most of the harvest periods are celebrated as Festivals in India. Hence, rural demand is not only harvest linked but also festival linked. 4. Characterized by Great Diversity: The rural consumers of India are vastly diverse in terms of religious, social, cultural and linguistic factors.

5. Steady growth despite inhibiting factors: The market has grown not only in quantitative terms, but qualitatively also. Many new products have made entry into rural consumer basket. CHANGING PATTERNS IN RURAL DEMAND - REASONS 1. New Employment Opportunities: New Income due to rural development or agricultural advancement. Hence, increased purchasing power. Self Employment policy with assistance from bank has become great success in rural areas. 2. Green Revolution: A technological breakthrough since 1965 in Indian agriculture. Today, rural India generates 185 million tonnes of food grains per year and expected to reach 210 million tonnes by 2010. It produces 15 million eggs, 90 million broilers, 50 million tonnes of milk per annum (White revolution, Blue Revolution). Operation flood. 3. Better credit facilities through banks:

All types of loans short, medium & long-term loans has helped rural masses in better investment. 4. Green Card / Credit Card for farmers: Helps / encourages farmers to buy consumer goods on easily payable credits / installment basis. 5. Improved exports due to Export Policy: Open market, WTO, GATT, has all resulted in better openings / markets, increased income, increased purchasing power. 6. Remittances from Indians working abroad: A sizeable contribution to growing rural income & purchasing power. 7. Expectation Revolution among Rural Masses: Expectation Revolution brought about a powerful change in the environmental dynamics. Awareness Of the Rural people Kindled their hopes Strengthened Earn Consume more their motivation more to work

8. Political & Social changes through favourable Government policies : New farm policy, high support price, tax exemption in backward areas, subsidy, etc. 9. Marketing Efforts:

Firms like HLL, Bajaj Auto, Godrej soaps, BFL, BrookeBond, etc. have started penetrating rural market. 10. Media: Role of newspapers, radio, T.V., etc. has given rise to new demand for goods and services.

TAPPING THE RURAL MARKETS While the rural market of India certainly offers a big attraction to markets, it would be totally nave to think that any firm can easily enter the market and walk away with a sizeable share of it. - What are these problems? - How are they peculiar to the rural market? - How does a firm solve them? The Problem Areas in Rural Marketing: 1. Physical Distribution

2. Channel Management 3. Sales force Management 4. Promotion and Marketing Communication I. Managing Physical Distribution in Rural Markets: The special problems in physical distribution in the rural context are: (i) (ii) i. Transportation Warehousing

(iii) Communication Transportation problem: Railway: Though India has the fourth largest railway system in the world; many parts of the rural India remain outside the rail network. Road: Nearly 50% of the 576000 villages in the country are not connected by roads at all. The government had planned to connect at least the bigger villages, i.e. villages with a population of 1500 or above, with all weather roads by 1990 but this is not accomplished yet. Many parts of rural India have only kuchha roads and many parts of the rural interiors are totally unconnected by roads with any mandi level town.

ii.

Warehousing problem:

Business firms find it quite difficult to get suitable godowns in many parts of rural India, and there are no public warehousing agencies in the interiors of rural India. Three tier warehouse structure: Top tier -At nodal points/ major market centre Second / Middle tier -At Mandi level Third / Bottom tier - At villages owned by cooperatives owned by cooperatives CWC and SWC

CWC/SWC does not extend their network of warehouses in rural parts. Warehouses owned by cooperatives provide warehousing service only to their members. A business firm has to manage with the CWC/SWC n/w, which stops with the nodal points, or it has to establish its own depots or stock points run by its stockiest / distributors. iii. Communication Problems: Communication infrastructure, consisting of posts or telegraph and telephones, is quite inadequate in rural areas. Cost-service dilemma Maintaining the required service in the delivery of the products at the retail level becomes very difficult. At the same time, physical distribution costs gets escalated with 80% of the total rural consumers living in the less than 1000 people category of villages. It means higher costs of transportation; higher inventory carrying costs and transit or storage losses. Consequently, the total distribution per unit is higher by as much as 50 % on an average in the rural market, as compared to the urban market. Some companies have fared two and a half times increase in the cost of distribution in rural areas compared to urban areas.

Solutions / Firms cope with Physical Distribution: 1. The Firm can share Physical Distribution responsibility with its stockists or clearing cum forwarding agents: With a view to keeping the costs low, some of the firms try out remote control marketing simply consigning the goods and retiring the bills through banks unfavourable for the long term. Instead, the firms have a network of stockists or c & f agents at the strategic locations for facilitating Physical Distribution of its products in the rural areas. Advantage The costs of physical distribution can be shared by the firm and the stockiest. 2. Combining different Modes o Transport may be Advantageous: o The system of rail-cum-trucks for long distance movement; o Trucks for medium / short distance movement; o Delivery vans and bullock carts for local haulage; o Water transport. Advantages Bullock carts are cheaper, they are available in plenty and are ideal for rural roads.

3.

Company Delivery Vans: Companies like HLL, Tomco, Brooke Bond-Lipton and ITC use delivery vans. These vans take the products to the retail shops in every nook and corner of the rural market. It enables the firm to establish direct salescontact with thousands of rural consumers, it also helps the firm in the sales promotion. Disadvantages: the cost of operating such vans is high. This can work only if the market / area assures business substantial enough to cover such costs.

4.

Syndicated Distribution: The firms come together and encourage an independent agency to operate such delivery vans with a view to hiring its service. The delivery vans here becomes a syndicated service.

II. Channel Management in the Rural Markets: i. Multiple tiers, High costs and Administrative Problem:
Manufacturers own warehouses / branch office

Wholesaler / Stockiest in the town

Mandi Level Distribution

Village Level Shopkeeper

Rural Consumer

ii. Scope For Manufacturers Own Outlets Limited, Greater Dependence on Dealers Inescapable Dependence of the firm on intermediaries is very much enhanced. Control is mostly indirect.

iii. Non Availability of Dealers: Even if the firm is willing to start from scratch and try out rank newcomers, the choice of candidates is really limited.

iv. Poor Viability of Retail Outlets: Manufacturer incurs additional expenses on distribution and still the retail outlets find that the business is unremunerated to them. v. Inadequate Bank Facilities: Rural outlets need banking support for three important purposes: To facilitate remittances to principals and to get fast replenishment of stocks To receive supplies through bank (retiring documents with the bank) To facilitate securing credit from banks. vi. Inadequate Credit Facilities from Banks: The rural outlets are unable to carry adequate stocks due to lack of credit facilities. They are unable to extend credit to their customers. And the vicious circle of lack of credit facilities leading to inadequate stocking or loss of business finally resulting in poor viability of outlets gets perpetuated. Solutions: The Existing Market Structure:

Indian rural market is composed of 22,000 primary rural markets and 20 lakh retail sales outlets of which nearly one lakh are FPS (Fair Price Shops) of the public Distribution System (PDS). One retail shop serves on average 60-70 families in the rural areas. The structure involves stock points in feeder Towns to service. These retail outlets at the village level. The stock points belong to either the manufacturer or the marketer / distributor for the area. The Available Channel Choices: Private shops- FPS Co-operative Societies Village Shandy/ Weekly markets.

The co-operative societies are mainly concerned with distribution of agricultural inputs are the FPS with distribution of essential commodities. The village shandy is widely used in rural marketing, but its role is limited in marketing branded products. The Private Village Shops: They are the main channel in the rural market for a large variety of consumer products; they are also the cheapest and the most convenient channel to align with. According to the Operations Research Group (ORG) there are 2.02 sales outlets in rural India.

It is quite natural that firms seeking an effective presence in rural marketing willingly embrace the private village shops. It has to select its outlets from out of existing shopkeepers or select a few fresher & appoint them as the outlets. The choices are usually confined to the following categories:- Existing traditional private shops. - Moneylenders willing to branch off to trade. - Land owners willing to branch off to trade. - Educated unemployed persons. Satellite Distribution: The firm appoints stockiest in feeder tours. They take care of financing of goods, warehousing of goods and sub-distribution of goods in the area covered by the feeder town. The firm also appoints a no. of retailers in and around the feeder towns and attaches them to the stockiest. The firm supplies the goods to the stockiest either on cash or credit or on consignment basis. The stockiest take care of the sub-distribution job or the terms or conditions determined by the firm. Over a period of time, some retailers grow in terms of business turnover. If such retail points also happen to be transportation centers within the feeder town area, the firm elevates them as stockiest. The area of operation of the original stockiest shrinks in this process, but care is taken to see that his volume of business does not shrink. This is achieved, in practice, on account of the

growth in demand & deeper market penetration. The process continues as long as the market keeps expanding. Advantages: It helps & facilitates market penetration in the interiors of rural market. Sales Force Management in Rural Market. Unique Traits required on the part of rural salesman. 1. Willingness to get located in Rural Areas. 2. Cultural congruence: The salesman must have proper acquaintance with the cultural pattern of rural life in the given territory. 3. Attitude factors: The rural salesman must have great deal of patience as their customer is a Traditional & cautious person. Perseverance is another essential traits 4. Knowledge of the local language: The rural salesman needs a strong background of the local language. He must be well versed in the specific lingo and idiom of the local area / community, for, in rural India, within each major language group, the colloquial expression and speaking manners vary considerably from locality to locality.

III.

5. Capacity to Handle Large Number of Product Lines: The rural salesmen usually do not generate economic volume of business if they handle a large variety of items. Rural salesman is also required to travel more compared to their urban counterparts. 6. Greater creativity: Rural salesman should introduce new products in the rural areas through creative selling, using the consumption pioneers and opinion leaders. Rural marketing also presupposes the delivery of new standard of living to the rural masses. It is essentially developmental marketing. IV Managing Rural Sales Force Selecting the salesman Giving them orientation more on the job training, coaching in selected village markets. Educate rural marketing environment. Motivating them. Developing them

Marketing Communication in Rural Markets

Problems: Low literacy rate: printed word has limited use. Tradition bound Cultural barriers Overall economic backwardness Linguistic diversity It has been estimated that all organized media put together can reach 30% of the rural population in India. Various publications reach only 18% of rural population. 33% of total cinema earnings in the country come from rural India. Communication Stages in Rural Area Rural Communication to be effective - repeat exposures is a must; and if the gap between them is long, the message loses its edge during this period. Creating Awareness Altering Attitudes

 Changing Solutions 1. media. Formal / Organized : TV, Cinema, Press, Other print media, direct mail, radio, point of purchase (Pops), outdoors, etc. Non-formal / rural Specific Media: A V vans / Publicity vans, Dance-dramas, Puppet Shows, rural specific art forms like Harikatha and Villupatu performed at village melas and temple festivals, demonstrations, study classes, mike announcements, processions, caparisoned elephants, decorated bullocks carts carrying ad panels, music records, house to house campaigns by special promotion squads, information centers on companies products. TV: 77 % of villages in India now receive TV transmission and 27 % of all rural people actual watch TV. Selecting the media mix: Evidently, in the rural context the firm has to choose a combination of formal and non-formal

Radio; is a well established medium in rural areas while radio as a medium cannot match TV in potentiality or effectiveness, radio does have a major role in rural communication. Cinema: 29 % of all rural people do see cinema as a matter of regular lifestyle or habit. Short feature films with disguised advertisement. Messages, direct advertisement, films or documentaries, that combine knowledge or advertisement can be employed for rural communication. Out Doors: Hoardings, wall paintings, illuminations and other displays in rural areas. Pops: More than written words, symbols, pictures and colours must be used. A V vans: Films can exhibit its films or other A-V presentations such as slide shows, sound or sight presentations, puppet shows, etc. The van is a comprehensive mobile promotion station at the exclusive command of the concerned firm. Portable exhibition kits can be carried in the vans. Disadvantage: The cost is high Syndicated AV vans: Firms which cannot effort to operate publicity vans of their own utilize the syndicated AV van service offered independent agencies. 2. Communication for the Rural Market has to be uniquely assembled and delivered: The theme, the message, the copy, the language or the delivery must match the rural context.

In rural marketing, usually a greater time lag is involved between introduction of a product and its economic size sale. This is the rural buyers adoption process is usually more time consuming. STRUCTURE AND TYPE OF AGRICULTURAL MARKET Dimensions of Market: 1. Based on Location 2. Based on Area / Coverage 3. Based on Time Span 4. Based on Volume of Transaction 5. Based on Nature of Transaction 6. Based on Degree of Competition 7. Based on Number of Commodities 8. Based on Nature of Commodities 9. Based on Stage of Marketing 10. Based on Extent of Public Intervention Classification of Markets 1. Location:

 Village Markets Located in small villages, major transaction takes place among buyers and sellers of a village. Primary Wholesale Market Located in big towns, near center of production of agricultural commodities, a major part of produce is brought for sale by the producerfarmer themselves. Transaction is between farmers and traders. Owned by market committees, local bodies / private individuals and are periodically held wherein every shopkeeper has to pay rent for the space he occupies. Secondary Wholesale Markets Located in district head quarters / important trade centers / near railway junctions, major transaction takes place between village traders and wholesalers. The bulk arrival in these markets is from other markets. The produce in these markets is handled in large quantities. There are specialized marketing agencies performing different functions such as; commission agents, brokers, weighmen. Terminal Markets where the produce is finally disposed off directly to the consumer / processor / assembled for export and possesses sufficient warehousing and storage facilities covering a wide area extending over a state or two. Sea board Markets Located near sea shore, meant for import / export of goods.

2. Area / Coverage: Local / Village Markets Buying and selling activities are confined among buyers and sellers drawn from same village or nearby villages, mostly perishable commodities in small lots. Ex: fresh milk, vegetables Regional Markets buyers and sellers for commodities are drawn from a National Market - buyers and sellers are at national level. Ex: dural World Market - buyers and sellers are drawn from whole world. Ex: coffee, larger area. Ex: food grains commodities like jute, tea 3. Time Span: Short period Market few hours, products of highly perishable nature. Ex: fish, milk Long Period Markets larger period, less perishable. Ex: food grains, oilseeds Secular Markets permanent nature. Ex: manufacture goods, timber 4. Volume of Transaction: gold, silver, cotton

 Wholesale Markets Commodities are bought and sold in large quantities / bulk. Transaction is between traders. Retail Markets Commodities are bought and sold as per consumer requirements. 5. Nature of Transaction: a. Spot or Cash Market: A market in which goods are exchanged for money immediately after the sale. b. Forward Market: Purchase and sale of commodities takes place at time t but the exchange of commodity takes place on some specific date in future i.e. t+1. 6. No of Commodities: a. General Market: All types of commodities such as food grains, oilseed, fibre crops etc. are bought and sold. b. Specialized Market: Transactions take place only in one or two commodities e.g. food grains market, cotton markets, mango markets. 7. Degree of competition: a. Perfect Market: Large number of buyers and sellers. b. Imperfect Market: Monopoly, Duopoly, Oligopoly, Monopolistic competition large no of sellers deal in heterogeneous and differentiated form of a commodity.

8. Nature of Commodities: a. Commodity Market: deals in goods and raw materials such as wheat, barley, cotton etc. b. Capital Market: deals with bonds, shares and securities. c. Service Market: deals in providing service e.g. consultancy 9. Stage of marketing: a. Producing market: Those markets, which mainly assemble the commodities for future distribution to other markets. Located in producing areas. b. Consuming Markets: Which collect the produce for final disposal to the consuming population located in areas where production is inadequate or in thickly populated urban centers. 10. Extent of public intervention: a. Regulated markets: Markets in which business is done in accordance with the rules and regulations framed by the statutory market organisation and represent different sections involved in markets. The marketing costs are b. Unregulated markets: Business is conducted without any set rules and regulations. Traders frame the rules for the conduct of business and run the market. METHODS OF SALE:

1. Under cover of a cloth (Hatha system): The prices of the produce are settled by the buyer and the commission agent of the seller by pressing/twisting the fingers of each other under cover of a piece of cloth. Code symbols are associated with the twisting of the fingers and traders are familiar with these. The negotiations in this manner continue till a final price is settled. When all the buyers have given their offers, the name and the offer price of the highest bidder is announced to the seller by the c.a. Disadvantage: Provides opportunities for cheating the seller this system has been abolished by the government. 2. Private Negotiations: Unregulated markets. The individual buyers come to the shops of commission agent at a time convenient to the latter and offer price for the produce which, they think are appropriate after the inspection of the sample. If the price is accepted the commission agent conveys the decision to the seller and the produce is given after it has been weighed, to the buyer. In village, private negotiations take place directly between the buyer and seller. Disadvantage: Time consuming, slow, not suitable when either large quantities have to be sold or a large number of buyers exist in the market. Advantage: Seller gets good price, for buyers are not aware of the price offered by other buyers.

3. Quotations on sample, taken by commission agent: The commission agent takes the sample of the produce to the shops of the buyer. The price is offered, based on the sample, by the prospective buyers. The commission agent makes a number of rounds to prospective buyers until none is ready to bid a higher price then the one offered by a particular buyer. The produce is given to highest bidder. 4. Dara Sale Method: The produce is mixed and then sold as one lot. Advantage: Within a short time a large number of lots are sold off. Disadvantage: produce of good quality and one of poor quality fetch same price. Therefore, loss of incentive to the farmers to produce quality goods. 5. Moghum Sale Method: The sale of produce is effected on the basis of a verbal understanding between the buyer and the seller without any pre-settlement of price but on the distinct understanding that the price of the produce to be paid by the buyer to the seller will be the one as prevailing in the market on that day or at that rate at which other sellers of the village sold the produce. This method is common in villages, for farmers are indebted to the local moneylenders. 6. Open Auction Method:

The prospective buyers gather at the shop of the commission agent around the heap of the produce, examine it and offer bids loudly. The produce is given to the highest bidder after taking consent of the seller farmer. In most of regulated markets the sale of produce is permissible only by this method. Advantage: 1. Fair dealing to all the parties. 2. Auction serves as meeting place for supply of and demand of the goods. 3. It disposes of the market supply promptly. 4. The payment of the price of goods is made immediately after the sale if an auction has been completed. Disadvantages: 1. Requires more time for both buyer and seller have to wait for the day and rime of auction. 2. In big market centers, especially in peak marketing season the time allotted for auction is short. As a result sellers may receive a low price. 3. Buyers sometimes join hands. 4. Auction leads to a buyer market for buyers have full information about the supply of and demand for the product.

3 types of open auctions: a. Phar system of open auction: One bid is given for all the lots in a particular shop and all the lots are sold at that price. One extreme case of this method is when one bid is given for the product in the whole market. b. Random Bid system of open auction: The commission agent invites a few buyers when the produce is brought to his shop for sale. All the prospective buyers are not informed. As a result competition is poor. c. Rostev Bid system of open auction: The bidding starts from a point in the market at a notified time about which the prospective buyers are given information in advance. The bidding party after the auction the produce at one shop moves to the next in a clockwise or anti clockwise directions till the auction of the produce at all the shops is over or the scheduled auction time expires. The auction is supervised by the auction clerk or the person nominated by the market committee. 7. Close Tender System: The produce displayed at the shop of the commission agent is allotted lot numbers. The prospective buyers visit the shops inspect the lots offer a price for the lot which they want to purchase on a slip of paper, and deposit the slip in a sealed box by buying at the commission agents shop. When the

auction time is over the slips are arranged according to the lot number and the highest bidder is informed by the commission agent that his bid has been accepted and that he should take delivery of the produce. Advantage: Time saving, involves minimum physical labour, no possibility of collision among the buyers. Regulated markets in Tamilnadu have close tender system method.

MARKETED AND MARKETABLE SURPLUS The producers surplus is the quantity of produce, which is, or can be, made available by the farmers to the non-farm population. The producers surplus is of two types: 1) Marketable Surplus: - is that quantity of the produce, which can be made available to the nonfarm population of the country. The marketable surplus is the residual left with the producerfarmer after meeting his requirements, for family consumption, farm need, for seeds, and feed for cattle, payment to Labour in kind, payment to artisans carpenter, blacksmith, potter and

mechanic payment to the landlord as rent, and social and religious payments in kind. MS1=PC; where MS1= Marketable surplus, P= Total production and C= Total requirements. 2) Marketed Surplus: - is that quantity of produce, which the producer-farmer actually sells in the market, irrespective of his requirements for family consumption, farm needs and other payments. Bansil writes that there is only one item- marketable surplus, which may be defined subjectively and objectively. Subjectively, the term refers to theoretical surplus available for sale with the producer-farmer after he has met his own genuine consumption requirements and the requirements of his family, the payment of wages in kind, his feed and need requirements; and his social and religious payments. Objectively, the marketed surplus is the total quantity of arrivals in the market out of the new crop. Limitations: a) Limited geographic coverage b) Small and marginal farmers c) Inconvenience in borrowing

Relationship between marketed and marketable surplus: Marketed surplus can be <, >, or = Marketable surplus 1) Marketed Surplus > Marketable surplus: - When the farmers retain a smaller quantity of the crop than his actual requirements for family and farm needs. This is true especially of small and marginal farmers, where need for cash is immediate. This situation of selling more than the marketable surplus is termed as distress or forced sale. 2) Marketed Surplus < Marketable Surplus: - When the farmer retains some of the surplus produce. This situation holds true under the following conditions: a) Large farmers generally sell less than the marketable surplus, because of their better retention capacity. They retain extra produce in the hope that they would get a higher price in the later period. b) Farmers may distribute the crop for another crop, either for family consumption purpose or for feeding their livestock, because of the variation in the prices. With the fall in price of the related to a competing crop, the farmers may consume more of the 1st crop and less of the 2nd crop. 3) Marketed Surplus = Marketable Surplus: - When the farmer retains neither more nor less than his requirements. This holds true for perishable commodities and of the average farmers

Factors affecting marketable surplus: 1) Size of holding There is positive relationship between the size of holding and the marketable surplus, according to a study by Dr. Dharm Narayan. 2) Level of Production Positive relationship. 3) Price of the communication has both positive and negative relationship, depending upon whether one considers short and long run, or the micro and macro levels. 4) Size of the family Larger the number of members in a family, the smaller the surplus in the farm. 5) Requirement of seeds and farm Higher the requirements, smaller is the marketed surplus. 6) Consumption habits e.g. South India- A.P., Karnataka are predominantly rice-consuming states, and hence wheat enters the market. 7) Cash requirements If fixed: Marketable surplus will vary inversely with price changes. If variable: Marketable surplus will increase in response to increase in price. 8) Nature of crops Farmers produce two types of crops: food crops and cash crops. Food crops are retained, while cash crops enter the market.

9) Mode of production Use of traditional methods: less marketable surplus; New technologies, HYV Seeds, chemical fertilizers: more marketable surplus. Relationship between prices and marketable surplus: 1) Inverse Relationship: - P.N.Mathur and M. Ezekiel. They postulate that the farmers cash requirements are nearly fixed; and given the price level, the marketed portion of the output is determined. This implies that the farmers consumption is a residual, and that the marketed surplus is inversely proportional to the price level. This behaviour assumes that farmers have inelastic cash requirements. Olson and Krishnan have also argued that the marketed surplus varies inversely with the market price. They contend that a higher price for a .. Crop may increase the producers real income sufficiently to ensure that the income effect on demand for the consumption of the crop outweighs the price effect on production and consumption. 2) Positive Relationship: - V.M.Dandekar and Rajkrishnan say there is a positive relationship. Rajkrishnan has pointed that the elasticity of the marketable surplus is not negative, so long as the substitution effect is non-zero.

MARKETING AGENCIES 1. Producers 2. Middlemen: i) Merchant Middlemen- Wholesalers, Retailers, Beoparies. ii) Agent Middlemen- Commission Agents, Arahatias, Brokers. iii) Speculative Middlemen- Those middlemen who take title to the product with a view to making a profit on it. They specialise in risk-taking. iv)Facilitative Middlemen- some middlemen do not buy and sell directly but assist in the marketing process. E.g. Hamals/Labourers, Weighmen/Tolas, Grades, Transport Agency, Communication Agencies, Advertising Agencies, etc. 1) Beoparis: Village Beoparis- have their small establishments in villages. They purchase the produce of those who have either taken finance from them or those who are not able to go to the market. Village beoparis also supply essential consumption goods to the farmers. They act as financiers of poor farmers. They often visit nearby markets or keep in touch with the prevailing prices.

They either sell the collected produce in the nearby market or retain it for sale at a later date in the village itself. Itinerant Beopari -is petty merchants who move from village to village, and directly purchase the produce from the cultivaters. They transport it to the nearby primary or secondary market and it there. (ii) Arahatias/Commision AgentsKaccha Arahatias primarily act for the sellers, including farmers. They sometimes provide advance money to farmers or itinevant beoparies/traders on condition that the produce will be disposed of through them. They charge arahatias/commission in addition to the normal rate of interest on the money they pay in advance. Pacca Arahatias- act on behalf of the traders in the consuming market. The processors (vice millers, oil millers or cotton/jute dealers) and big wholesalers in the consuming markets employ Pacca arahatias as their agents for the purchase of a specified quantity of goods within a given price range. MARKETING FINANCE Agricultural credit is of two types:

1. Production credit 1. Production credit: (i) Short term: -

2.Consumption credit

15 to 18 months Loans to meet daily working capital requirements of Farmers purchase of Inputs, payment of wages, hike charges of machinery or Tools, electricity charges etc. (a) Cash component (b) Kind component: Co-operative marketing societies.

(ii) Medium term: - Survey committee 15 months to 5 years. NABARD 18 months to7 years. Creating capital assets. Purchase of livestock, agricultural machinery, equipment etc. Only a part of medium term loan is expected to be ventured in current production. The remaining is carried forward over the period of 7 years. (iii)Long term: 5/7 years to 20/25 years.

Land fencing, mechanization, construction of farm Houses, storage facilities etc. 2. Consumption credit: It is basically for survival of farm families. Sources of agricultural credit: a) Co-operative credit: i) Primary cooperative credit: Short term ii) C-operative Land Development Bank: Medium term Limitations: i) Limited geographic coverage ii) Small and marginal farmers iii) Inconvenience in borrowing IV) Huge over dues V) Linked with ownership landholding b) RBI: Appointed AIRCSC, recommended: i) The National Agri. Credit (Long term operations) fund;

ii)

The National Agri. Credit (Stabilization fund) Margins and security Credit norms finance: 30:70 cash: kind Recovery or default

RBI issues guidelines:

c) SBI: It provides financial assistance to marketing for processing co-operatives as well as for co-operative sugar factories, LDBs, industrial co-operatives etc. d) Commercial Banks: Direct finance is granted for agricultural operations for short and medium periods. Indirect finance is granted by providing advances for distribution of fertilizers or other inputs. These banks also finance for operation of FCI, State Government and their agencies for procurement. e) Agricultural Refinance: Parliament established Devt Corporation: 1963 To co-ordinate, guide and assist long-term finance lending institution. Helping in reduction of regional imbalances.

Reduction of regional disparities within states. Economic upliftment of weaker section. f) R.R.B: (Features) Rural Based Cater to the needs of backward areas. Authorized capital structure: Authorized Capital- Rs. 1 Crore, Paid-up capital- Rs 25 Lakhs, Share Capital Ratio 50:15:35 i.e. Govt: Own Deposits: Sponsoring Commercial Bank. Problems: Problems in organization (Multi-agency control) Increasing Losses. Recovery Problems. Problems in Management. g) NABARD: development. h) Government Finance: Takkavi loans to release distress caused by the draughts, floods and the other natural calamities. Apex Body, which looks after the financial needs of agricultural and rural

 TO assist the farmers to overcome emergencies. Land Improvement loans Act 1883 Long-term loans. Agriculturists Loans Act 1884 Short-term loans. Factors Affecting Capital Requirements of an Agriculture- Marketing Firm: Nature and Volume of Business : Financial requirements for trading in high value crops like cumin, chillies, Cotton and oilseeds are higher than for trading in food grains. Whole sale business requires more than retail business. Necessity of carrying large stocks: This is in case of seasonal produce. Continuity of business during various seasons: Financial requirements are higher for continuing business than the seasonal businesses. Time required between production and sale: Financial requirements are higher for durable goods than the perishable ones. Terms of payment for purchase and sale: Whether payment will be in cash or credit or by installments affect financial requirements of manufacturing middlemen. Fluctuations in the price: If the prices increase, the financial requirements increase.

 Risk Taking capacity: A middleman with low risk taking capacity often resorts to hedging and needs less finance than the middleman who takes risk. General conditions in the economy: During the period of price falls/recession, the financial requirements increase, since the marketing agency has to hold stock for a longer period in anticipation of a price rise. DEFECTS IN RURAL MARKETING:Efficient Marketing is a prerequisite in the development process of any economy. The basic objectives of an efficient marketing are to ensure remunerative prices to the producers and a reduction in the marketing costs and margins, to provide commodities to the consumers at reasonable prices, and promote the movement of surpluses for economic development. There are many imperfections in the marketing system for agricultural commodities. They are: 1) Heavy village scales of agricultural commodities:A majority of the farmers in India sell a large part of their produce in the villages , which result in low returns for their produce .The village sale is 20% to 60% in the food grains, 35% to 80% in cash crops and 80% to 90% in perishable commodities .

The factors responsible for village sale :a) Farmers are indebted to village moneylenders, traders or landlords. They are often forced either to enter into advance sale contract or sell the produce to them at low prices. b) Transport Bottlenecks: Difficult to carry the produce in bullock carts to the markets which is often situated at long distances. c) There is small quantity of marketable surplus with a majority of the farmers since of the small size holdings. d) Perishability of the produce or lack of storage facilities. e) Farmers dislike city markets mainly since of their lack of knowledge about prevailing market practices, the possibility of theft or robbery in transit. 2) Post harvest immediate sales by farmers / distress sales:A majority of the cultivators tend to sell their produce immediately after the harvest at the low prices prevailing at that time. About 60% to 80% of the food grains are still marketed in the first quarter of the harvest season. The reasons for existence of "Distress Sales ":-

a) Poor Retention power of the farmers arising out of their pressing need for cash to repay their debts and meet their cash needs for payment of land revenue, the purchase of items of basic necessity , and for meeting their social obligations. b) Inadequate storage facilities available in the villages , either private or public . c) Fear of loss of produce by fire, theft or other uncertainties . d) Low risk bearing ability of the farmers. e) In surplus producing states like Punjab or Haryana , most of the marketed surplus of the wheat or paddy / rice is sold by the farmers to public agencies at the support prices and this remains constant during marketing year. Hence, it is advantageous to sell during post harvest season. 3. Inadequacy of institutional marketing infrastructure and lack of producers organization: Farmers are disorganized and market their produce individually. Because of this, they have low bargaining power and they have to deal with traders having strong organization. They cannot therefore, insist on a reservation price for their produce and they silently watch as the open auction takes place. The reasons for lack of organization among them are - Caste feeling among the farmers - Locational disadvantages and difficulty in bringing them under one organisation.

- Difference in the size of holdings and the surplus available with the farmers. - Marketing aspect is not given due importance by the farmers, because of their ignorance. 4. Existence of many middlemen / Superfluous Middlemen: There is no restriction from social / government for entry of market middlemen, therefore, there a number of middlemen between producer and consumer. As a result of which the length of marketing channel increases and the cost of marketing and market margins go up. Hence, producers receive fewer prices, while consumers pay high price. 5. Multiplicity of Market Charges: The cost of market of produces worth Rs. 100/- is very high for agricultural goods compared to that of the products of other sectors. A large number of market charges commission, brokerage, weighment, hamali, karda (impurity charges), dhalta (excessive moisture charges), muddat (charge for making cash payment), darmada (charity for goshala, water hut), etc are paid. The rates of these charges also vary from market to market. 6. Existence of Malpractices: Such as deduction of unauthorized market charges, spurious deductions, unfair weighment, taking away a part of produce as sample by bidders, bungling of accounts, etc. this results in an increase in real cost of marketing of produce.

7. Lack of Reliable and up-to-date market information: There are no of reliable channel for the communication of price information to producer-farmers, who are isolated in remote villages. In the absence of reliable information, farmers depend on the hearsay reports which they receive from village merchants and as result sell their produce at lower rates. 8. Absence of Grading or standardization of produceA large no. of farmers have little knowledge of the practice of the grading of the produce prior to its sale. They usually mix up superior or inferior quality products to make a single lot. As a result, they get a lower price for their produce. Sometimes, farmers are penalized by traders for the existence of a small percentage of poor quality produce in the lot. 9. Inadequate storage facilitiesBy its very nature, agricultural products is not only confined to few areas but it is also confined to few reasons in a year, whereas its consumption is spread throughout the year so the continuous supplies can be assured throughout the year only by adequate & efficient storage facilities. Presently, the storage facilities are not only inadequate but also the available godowns are not properly managed. This has resulted in wastages or reduced supplies, as a result high prices during off season. 10. Inadequate transport or communication facilities-

Inadequate transport or communication facilities are one of the prime obstacles in the improvement of marketing efficiency. Since of the resource specificity or fixity, certain crops and products can be grown only in certain regions. The surplus produce of these areas has to be distributed to other places, which are in need of it. 11. High costs of borrowingCharging exorbitant rates, cheating illiterate borrowers by inserting larger amounts than borrowed, non-issue of receipts for repayments were & are major problems faced by farmers while borrowing from money lenders. The situation has not improved much with the role of institutional credit as farmers find the institutional sources more cumbersome & rigid. LINES OF IMPROVEMENT 1. Establishment of regulated marketRegulated markets are placed where transaction are governed by various rules or regulations. Markets may be regulated either by local bodies or operate under the state legislation. The market communities consisting of representatives of growers, traders & the government look after the functioning of these markets. They are responsible for the employment of the fare trading practices, licensing of market functionaries, curbing the deduction of unauthorized market charges.

Introduction of open auction system of sales & enforcement of standard weights or to reduce impartial arbitration in case of disputes. In short, a rural market offers a package of measures to remove these defects. 2. Use of standard weights and measures: There are two acts namely; (a) The standards of weights and measures act, 1958 which prescribes compulsory use of metric system of weights and measures in the country. (b) Standards of weight & measures (packed goods) act, 1977, ensures packing of goods of the correct weights in the packages already existing. A regulated market also ensures weighment of the produce is done by a licensed weigh man with std. Weights & a platform scale. In some markets, a weighbridge has been installed. This eliminates short weights & malpractices. 3. Standardization of contracts: A series of legislation came into effect to ensure regulation of all marketing activities. Many of the marketing charges such as darmada, karda, dhalta & muddat are abolished. Method of sales like hatta system is banned. Recently, the market charges payable by sellers have been transferred to the buyer.

4. Provision of marketing news: Marketing news & information is vital for taking production & marketing decision. The domestic demand for food grains may be stable. But the demand for cash crops like sugarcane turmeric, tobacco etc independent on several other factors so information on demand pattern, price behaviour, better methods of production handling& packing etc had to be made available to them appropriate decisions. 5. Improvement of transport facilities: The following are some of the suggestions for effecting improvements in transport functions reducing transport costs: I. There must be full utilization of the capacity of the transportation facility in terms of load to reduce per quintal cost of transportation. II. The transportation cost per quintal can be reduced by fixing the rate of transportation for different means. III. Use of proper types of wagons to reduce spoilage, damage, breakage or pilferage. IV. There should be reduction in the barriers to inter-state movement of produce. 6. Increased provision of storage & warehousing facilities: -

Different means of storages & warehouses have to be provided. Govt. has already launched a scheme called national grid of rural godowns (NGRG) in 1979 to the extent of 50% to be shared equally by central & state govt. cold storage for perishable commodities such as fruits, vegetables; fish, eggs, meat, dairy products, etc have to be established or made available at affordable cost to the farmers. A network of rural storage centres should be built on priority basis in order to prevent distress sales, wastage and loss arising out of inadequate and defective storage facilities. These storage centres may be constructed and managed by panchayats, co-operatives and other available by panchayats selected by state government. 7. Improvement in grading and standardization: Grading means sorting of unlike lots of the produce into different lots according to the quality specifications laid down. While, standardisation is determination of basic limits or grades. Grading or standardisation enables farmers to get a higher price for their produce, it reduces market costs by minimizing the expenses on the physical inspection of produce, minimizes storage losses, ensures better scope of exports, etc. Hence awareness of grading & standardisation and its advantages has to be built up. 8. Development of co-operative marketing:

Co-operative organisations are voluntary business organisations formed by the members with a felt need to market their own compared to the collectively to maximize advantages as compared to the private trade. The following advantages can be derived from co-operative marketing system I. ii. iii. iv. Marketing co-operatives can generate necessary holding power with farmers by providing easy and cheap credit to them. This will help check distress sales. They can protect the farmers from exploitation at the hands of traders by offering collective bargaining. Co-operatives can help to reduce the price spread Co-operative marketing may have a healthy impact on marketing trends and will help in the stabilisation of prices. In brief, co-operative marketing may link, integrate, or streamline production marketing or processing firms. STATE TRADING AND RURAL MARKETING One of the responsibilities of government is to ensure the supply of essential commodities to the people. This may require direct intervention on its parts in trading of agricultural commodities.

Objectives of State Trading: I. II. III. To make available supplies of essential commodities to consumers at reasonable prices on a regular basis. To ensure a fair price of the produce to the farmers so that there may be an adequate incentive to increase production. To minimize violent price fluctuations occurring as a result of seasonal variations in supply and demand. IV. To arrange for supply of such as fertilizers and insecticides. V. To undertake the procurement and maintenance of buffer stock and their distribution whenever and wherever necessary. VI. To arrange for storage, transportation, packaging and processing. VII. To check hoarding, black marketing and profiteering. Types of State Trading: a. Partial State Trading: Here, private traders and government coexist. Traders are free to buy and well in the market the government may place some restrictions on them, such as declaration of stocks. Limits on stocks

which can be held at a point of time and submission of regular accounts. The government enters the market for purchase of commodities directly from producers at notified procurement price. It undertakes the distribution of commodities to consumers to consumers through a network of price shops. b. Complete Shops: The purchase and sale of commodities is undertaken entirely by the government or its agencies. Private traders are not allowed to enter the market for purchase or sale. In India, complete wholesale trade in wheat was taken over by the government in 1973; but it had to be given very soon. State Trading was initially taken up by the food department in the state and central government. In Jan 1965, the FCI was set up to undertake the purchase, storage movement, transport, distribution and sale of foodgrains. Please Note The material being circulated is just my personal copy any addition or deletion is left to the discretion of the concerned faculty. This notes is neither a text book nor a guide, but just a reference material.

With Regards, Mrs. Malini Nagabhushan Rural marketing contd Satellite Distribution A concept that has come to be known as satellite distribution can be tried in developing a distribution channel in the rural market. Under this system, to start with, the firm appoints stockists in feeder towns. They take care of financing goods, warehousing of goods and sub- distribution of goods in the area covered by the feeder town. The firm also appoints a number of retailers in and around the feeder towns and attaches them to the stockists. The firm supplies the goods to the stockists either on cash or on credit or on consignment basis. The stockists take care of the subdistribution job on the terms and conditions determined by the firm.

Stockist

Feedeer Town ** Small circles indicate Stockiest located in Rural area The sales volume of the retailers will vary depending on the potential of the area covered and the capacity of the dealer concerned. Over a period of time, some retailers grow in terms of business turnover. If such retail points also happen to be transportation centres within the feeder town area, the firm elevates them as stockists. The area of operation of the original stockist shrinks in this process, but care is taken to see that his, volume of business does not shrink. This is achieved, in practice, on account of the growth in demand and deeper market penetration. If twenty retailers operate in the network of an original stockist, five or six of them get elevated over a period of time as stockists. Out of the retailers some remain attached to the original stockist and others are attached to the new stockists, depending on location, service convenience and other relevant factors. The process continues as long as the market keeps expanding just like the second-generation stockists, a set of third generation stockists get established in course of time. And at any point of time, enough retail points invariably hover around a particular stockist. Hence the name satellite distribution. The main advantage of this system is that it facilitates market penetration in the interiors of the rural market. However, the firm must ensure that in the process, the motivation of the earlier generation stockists is not destroyed due to overzealous and premature elevation of the retailers into stockists. Note: This can be asked for 2 marks. You can also use this to explain physical distribution strategies to be adopted by companies if the question is asked or use it in case study.

Types of agricultural Markets: 1. Primary wholesale markets Primary wholesale markets, where the bulk of arrivals is from village or village hats. These market are periodically held, either once or twice a week or at longer intervals or on special occasions. Located in big towns, near center of production of agricultural commodities, a major part of produce is brought for sale by the producer-farmer themselves. Transaction is between farmers and traders. Owned by market committees, local bodies / private individuals. Agricultural produce, or livestock or both are sold in these markets. There are about 22000 such markets located mostly in the interior of the country. The area served by a hat or a shandy varies considerably. In some cases it is only one village but in others it may have a radius of 6 or 7 miles. These markets deal in sale of Fruits and vegetables, food grains, cloth; earthen wares, lac and glass bangles and articles of daily use and transactions take place either for cash or exchange in household requisites. . Here haggling and bargaining is a common feature. The village bania acts as a middleman in return for a small commission. Such markets are known as Painths or hats in U. P., Bihar, Orissa and West Bengal, and Shandies in south India. For the up keep of such markets superficially 3 types of taxes are collected viz. a. Sales Tax b. Service Tax c. Place Tax

However in practice a large number of ritualistic deductions and local taxes are applied to the produce sold here. 2. Secondary wholesale markets Secondary wholesale markets, also known as mandis and Gunjs, stretch over a wide area covering from 10 to 20 miles. There are about 1,700 such markets in the, country. In these markets, the bulk of the arrivals is from other markets. These are usually situated in the district and taluka headquarters, important trade centres or near railway stations. Here transactions are generally between wholesalers or between wholesalers and retailers. Secondary Markets functions are usually in urban and semi-urban areas. Here facilities of storage and banking are available. Mostly wholesale as well as retail trade both take place in the same complex simultaneously. A large number of intermediaries exist in these markets. The traders who purchase from the primary markets in wholesale trade, they buy in these markets. The manufacturers who use agricultural produce as a primary input purchase raw material in wholesale in these markets. The wholeseller performs the marketing function of assembly and distribution. It may be noted that the actual producer the Farmer is completely absent in wholesale markets. 3. Terminal Markets Terminal Markets are those in which the produce is either finally disposed of directly to consumers or processors or assembled for shipment to foreign destinations or for redistribution to surrounding area and possesses sufficient warehousing and storage facilities covering a wide area extending over a state or two.Such markets are usually the ports, which possess sufficient warehousing and storage facilities and cover a very wide area extending over even a State or two. It may be observed that a particular market may function as a Primary wholesale market for some agricultural commodities, which are produced locally and as a secondary market for other commodities. Again, even for the same commodity a market may function as primary wholesale market for certain parts of the year and as a secondary wholesale market for the rest of the year.

Note: Each of these markets can be asked for 02 marks. Also the differences among them can come for 02 marks. Note: Apart from above mentioned classification, some more classifications can be done into agricultural markets, they are not mentioned in the syllabus, just have a look at it. Classification of Markets 1. Location: Village Markets Located in small villages, major transaction takes place among buyers and sellers of a village. Primary Wholesale Market Secondary Wholesale Terminal Markets Sea board Markets Located near sea shore, meant for import / export of goods. 2. Area / Coverage: Local / Village Markets Buying and selling activities are confined among buyers and sellers drawn from same village or nearby villages, mostly perishable commodities in small lots. Ex: fresh milk, vegetables Regional Markets buyers and sellers for commodities are drawn from a larger area. Ex: food grains National Market - buyers and sellers are at national level. Ex: dural commodities like jute, tea

 World Market - buyers and sellers are drawn from whole world. Ex: coffee, gold, silver, cotton 3. Time Span: Short period Market few hours, products of highly perishable nature. Ex: fish, milk Long Period Markets larger period, less perishable. Ex: food grains, oilseeds Secular Markets permanent nature. Ex: manufacture goods, timber 4. Volume of Transaction: Wholesale Markets Commodities are bought and sold in large quantities / bulk. Transaction is between traders. Retail Markets Commodities are bought and sold as per consumer requirements. 5. Nature of Transaction: c. Spot or Cash Market: A market in which goods are exchanged for money immediately after the sale. d. Forward Market: Purchase and sale of commodities takes place at time t but the exchange of commodity takes place on some specific date in future i.e. t+1. 6. No of Commodities: c. General Market: All types of commodities such as food grains, oilseed, fibre crops etc. are bought and sold. d. Specialised Market: Transactions take place only in one or two commodities e.g. food grains market, cotton markets, mango markets.

7. Degree of competition: c. Perfect Market: Large number of buyers and sellers. d. Imperfect Market: Monopoly, Duopoly, Oligopoly, Monopolistic competition large no of sellers deal in heterogeneous and differentiated form of a commodity. 8. Nature of Commodities: d. Commodity Market: deals in goods and raw materials such as wheat, barley, cotton etc. e. Capital Market: deals with bonds, shares and securities. f. Service Market: deals in providing service e.g. consultancy 9. Stage of marketing: c. Producing market: Those markets, which mainly assemble the commodities for future distribution to other markets. Located in producing areas. d. Consuming Markets: Which collect the produce for final disposal to the consuming population located in areas where production is inadequate or in thickly populated urban centers. 10. Extent of public intervention: c. Regulated markets: Markets in which business is done in accordance with the rules and regulations framed by the statutory market organisation and represent different sections involved in markets. The marketing costs are d. Unregulated markets: Business is conducted without any set rules and regulations. Traders frame the rules for the conduct of business and run the market.

Marketing Agencies A very large number of intermediaries have come to exist between producer and consumers of these the major ones are: 1. Village Beopari is by far the most usual purchaser of the produce, who deals in his individual capacity. They purchase the produce of those who have either taken finance from them or those who are not able to go to the market. Village beoparis also supply essential consumption goods to the farmers. They act as financiers of poor farmers. They often visit nearby markets or keep in touch with the prevailing prices. They either sell the collected produce in the nearby market or retain it for sale at a later date in the village itself. He usually collects the produce from the villages and hats and brings it to the wholesale markets and from there it reaches the consumers. Beoparies generally purchase when prices are low and sell it when they are high. 2. Itinerant Beopari are petty merchants who move from village to village, collects the produce from the cultivaters and takes it to the nearest market, transport it to the nearby primary or secondary market. They usually purchase at cheaper rates owing to the lack of competition from other beoparies. 3. Tola or Weigh men also to some extent function as intermediaries. Technically speaking they are supposed to only weigh the produce and charge a commission for certifying its weight. But it is more than often seen that these tola also arrange the sale of the producer by carrying samples to dealers in towns. They obliviously charge a commission for this and also Tolai. 4. Local landlords and cultivators, especially the medium size holders also sell the produce directly to the village beoparies or town dealers visiting the village markets.

5. Arhatiyas (Brokers or Commission Agents) : They usually occupy a very important position among all the intermediaries. They are of 2 types: a. Kutcha arhatiya mainly concentrates on the work of collecting and assembling the produce. Primarily act for the sellers, including farmers. They sometimes provide advance money to farmers or itinevant beoparies/traders on condition that the produce will be disposed of through them. They charge arahatias/commission in addition to the normal rate of interest on the money they pay in advance. b. Pucca arhatiya on the other hand arranges for the sale and distribution of the produce. Act on behalf of the traders in the consuming market. The processors (vice millers, oil millers or cotton/jute dealers) and big wholesalers in the consuming markets employ Pacca arahatias as their agents for the purchase of a specified quantity of goods within a given price range. Both work together in tandem as master and apprentice. They also advance loans to the village merchants and traders on the condition that the produce will be sold to them or through them. Note: This can come for 2 marks or can form a part of 10 marks question Methods of Sale Under cover of a cloth (Hatha system): The prices of the produce are settled by the buyer and the commission agent of the seller by pressing/twisting the fingers of each other under cover of a piece of cloth. Code symbols are associated with the twisting of the fingers and traders are familiar with these. The negotiations in this manner continue till a final price is settled. When all the buyers have given their offers, the name and the offer price of the highest bidder is announced to the seller by the commission agent.

Disadvantage: Provides opportunities for cheating the seller as he is unaware of the price offered, only the commission agent and the ultimate buyer who really knows the negotiated price. This system has been abolished by the government. Private Negotiations: Unregulated markets. The individual buyers come to the shops of commission agent at a time convenient to the latter and offer price for the produce which, they think are appropriate after the inspection of the sample. If the price is accepted the commission agent conveys the decision to the seller and the produce is given after it has been weighed, to the buyer. In village, private negotiations take place directly between the buyer and seller. Disadvantage: Time consuming, slow, not suitable when either large quantities have to be sold or a large number of buyers exist in the market. Advantage: Seller gets good price, for buyers are not aware of the price offered by other buyers. Quotations on sample, taken by commission agent: The commission agent takes the sample of the produce to the shops of the buyer. The price is offered, based on the sample, by the prospective buyers. The commission agent makes a number of rounds to prospective buyers until none is ready to bid a higher price then the one offered by a particular buyer. The produce is given to highest bidder. Dara Sale Method: The produce is mixed and then sold as one lot. Advantage: Within a short time a large number of lots are sold off. Disadvantage: produce of good quality and one of poor quality fetch same price. Therefore, loss of incentive to the farmers to produce quality goods.

Moghum Sale Method: The sale of produce is effected on the basis of a verbal understanding between the buyer and the seller. Seller is bound to deliver the produce to the buyer on a set date within a period prescribed by a verbal understanding between the 2. In return the buyer is supposed to pay the price ruling on the delivery day or at that rate at which other sellers of the village sold the produce. This method is common in villages, for farmers are indebted to the local moneylenders. Open Auction Method: The prospective buyers gather at the shop of the commission agent around the heap of the produce, examine it and offer bids loudly. The produce is given to the highest bidder after taking consent of the seller farmer. In most of regulated markets the sale of produce is permissible only by this method. Advantage: -Fair dealing to all the parties. -Auction serves as meeting place for supply of and demand of the goods. -It disposes of the market supply promptly. -The payment of the price of goods is made immediately after the sale if an auction has been completed. Disadvantages: -Requires more time for both buyer and seller have to wait for the day and rime of auction. -In big market centers, especially in peak marketing season the time allotted for auction is short. As a result sellers may receive a low price. -Buyers sometimes join hands.

-Auction leads to a buyer market for buyers have full information about the supply of and demand for the product. 3 types of open auctions: 1. Phar system of open auction: One bid is given for all the lots in a particular shop and all the lots are sold at that price. One extreme case of this method is when one bid is given for the product in the whole market. 2. Random Bid system of open auction: The commission agent invites a few buyers when the produce is brought to his shop for sale. All the prospective buyers are not informed. As a result competition is poor. 3. Rostev Bid system of open auction: The bidding starts from a point in the market at a notified time about which the prospective buyers are given information in advance. The bidding party after the auction the produce at one shop moves to the next in a clockwise or anti clockwise directions till the auction of the produce at all the shops is over or the scheduled auction time expires. The auction is supervised by the auction clerk or the person nominated by the market committee. 4. Close Tender System: The produce displayed at the shop of the commission agent is allotted lot numbers. The prospective buyers visit the shops inspect the lots offer a price for the lot which they want to purchase on a slip of paper, and deposit the slip in a sealed box by buying at the commission agents shop. When the auction time is over the slips are arranged according to the lot number and the highest bidder is informed by the commission agent that his bid has been accepted and that he should take delivery of the produce. Advantage: Time saving, involves minimum physical labour, no possibility of collision among the buyers. Regulated markets in Tamilnadu have close tender system method.

5. Jalap Sale Under this method the traders purchase the standing crop of the producer well in advance of the harvest at a price fixed on the date of the bargain. The price is usually coated in lump sum for the entire crop and the seller may receive 50% of the value of the sale transaction in advance. Usually the Jalap Sale goes against the agriculturalist seller as the price is fixed and determined by the buyer on the basis of the urgency to sell and not on the basis of the prevailing market rates. Such price quotations are in most cases abnormally low, further if the crop fails to give the expected return the buyer may force the producer to reduce the price further. Note: Either each system can be asked or distinction among 2 system can be asked for 02 marks. Methods of sale full question can appear for 10 marks. MARKETED AND MARKETABLE SURPLUS The producers surplus is the quantity of produce, which is, or can be, made available by the farmers to the non-farm population. The producers surplus is of two types: 1) Marketable Surplus: - is that quantity of the produce, which can be made available to the non-farm population of the country. The marketable surplus is the residual left with the producer-farmer after meeting his requirements, for family consumption, farm need, for seeds, and feed for cattle, payment to Labour in kind, payment to artisans carpenter, blacksmith, potter and mechanic payment to the landlord as rent, and social and religious payments in kind. MS1=P-C; where MS1= Marketable surplus, P= Total production and C= Total requirements.

2) Marketed Surplus: - is that quantity of produce, which the producer-farmer actually sells in the market, irrespective of his requirements for family consumption, farm needs and other payments. Relationship between marketed and marketable surplus: Marketed surplus can be <, >, or = Marketable surplus Marketed Surplus > Marketable surplus: - When the farmers retain a smaller quantity of the crop than his actual requirements for family and farm needs. This is true especially of small and marginal farmers, where need for cash is immediate. This situation of selling more than the marketable surplus is termed as distress or forced sale. Marketed Surplus < Marketable Surplus: - When the farmer retains some of the surplus produce. This situation holds true under the following conditions: a) Large farmers generally sell less than the marketable surplus, because of their better retention capacity. They retain extra produce in the hope that they would get a higher price in the later period. b) Farmers may distribute the crop for another crop, either for family consumption purpose or for feeding their livestock, because of the variation in the prices. With the fall in price of the related to a competing crop, the farmers may consume more of the 1st crop and less of the 2nd crop. Marketed Surplus = Marketable Surplus: - When the farmer retains neither more nor less than his requirements. This holds true for perishable commodities and of the average farmers Factors affecting marketable surplus:

=Size of holding There is positive relationship between the size of holding and the marketable surplus, according to a study by Dr. Dharm Narayan. =Level of Production Positive relationship. =Price of the communication has both positive and negative relationship, depending upon whether one considers short and long run, or the micro and macro levels. =Size of the family Larger the number of members in a family, the smaller the surplus in the farm. =Requirement of seeds and farm Higher the requirements, smaller is the marketed surplus. =Consumption habits e.g. South India- A.P., Karnataka are predominantly rice-consuming states, and hence wheat enters the market. =Cash requirements If fixed: Marketable surplus will vary inversely with price changes. If variable: Marketable surplus will increase in response to increase in price. =Nature of crops Farmers produce two types of crops: food crops and cash crops. Food crops are retained, while cash crops enter the market. =Mode of production Use of traditional methods: less marketable surplus; New technologies, HYV Seeds, chemical fertilizers: more marketable surplus. Relationship between prices and marketable surplus: =Inverse Relationship: - P.N.Mathur and M. Ezekiel. They postulate that the farmers cash requirements are nearly fixed; and given the price level, the marketed portion of the output is determined. This implies that the farmers consumption is a residual, and that the marketed surplus is inversely proportional to the price level. This behaviour assumes that farmers have inelastic cash requirements. Olson and Krishnan have also argued that the marketed surplus varies inversely with the market price. They contend that a higher price for a .. Crop may increase the producers real income

sufficiently to ensure that the income effect on demand for the consumption of the crop outweighs the price effect on production and consumption. =Positive Relationship: - V.M.Dandekar and Rajkrishnan say there is a positive relationship. Rajkrishnan has pointed that the elasticity of the marketable surplus is not negative, so long as the substitution effect is non-zero. . Note: It usually appears for 2 marks but can also come for 10 marks. Defects of Agricultural Marketing 1. Lack of organization among producers 2. Forced Sale 3. Superfluous Middlemen 4. Multiplicity of Market Charges 5. Malpractices of Middlemen 6. Absence of Grading and Standardization 7. Inadequate storage facilities 8. Underdeveloped Transport System 9. Lack of Marketing Information 10. High Cost of Borrowing 11. Multiplicity of Weights and Measures 12. Adulteration 1. Lack of organization among producers: Lack of organization among producers is one of the basic and fundamental problems in the Indian Agricultural Marketing scenario. The farmers of India are small and scattered all across the country. The producers have little or no place to store. The produced moreover is small per farmer.

Also almost all small farmers are neck deep in debt and need cash reasonable fast due to the unusual structure of agriculturism in India. An organizational attempt at the grass root level usually fails. Cooperative movement in India seems to have failed and thus the small farmers lack organization. 2. Forced Sale: In a scenario wherein the farmer producer is disorganized, requires cash at double speed and has no storage facilities at the local level, he is forced to sell at a lower price. Many a times the endrocities of the moneylenders are almost hedging on the farmers to sell their produce at lower than reasonable rates. The forced sale phenomenon is one of the major reasons responsible for the pathetic condition of the rural farmer. Causes of Heavy Sales in the Villages The following are chief causes leading to heavy sales in the villages: The most important cause for the high percentage of produce sold in the village is without doubt the indebtedness of' the producer. The second important factor, which is responsible for the high percentage of village sales, is the unsatisfactory, nature of communication with the nearest market. The element of time is an important factor and this for double reason. The marketing possibilities of perishable commodities depend very largely on the rapidity with which they can be transported to the marketplace. Most of the cultivators are hard-pressed for cash to meet the claims of their creditors and to pay off rent and other charges. Even when they know fully well that by holding up the crop for a few months they would be able to secure a better net return, they have usually no other alternative but to market the produce immediately in order to meet their urgent liabilities. 3. Superfluous Middlemen: Traders are the main functionaries in a market. They dominate every activity in the markets. They ignore the interest of the farmer-producers who are the sellers. Due to this the Indian farmer is

not getting good returns. The Middlemen intervention is uncalled for, as they are the reason behind the malpractices in agricultural marketing in India. Due to the sales methods adopted by the middlemen the farmer seldom knows what price they are to receive for their sale. Infact due to inadequate new facilities most of the time farmers dont even know the prevailing prices/rates in the market. Due to the various barriers in taking the produce to the urban market, many farmers prefer to sell these in the local village market, as these village markets are small and distant, there are very few buyers for agricultural produce. Sometimes there is only one buyer. This buyer resorts to monsoly and buys at a very low rate. Moreover he further exploits (resorts to monopoly) by selling consumer goods and agricultural inputs to the farmers at a very high price. It will thus be noted that there exist as many as 10 to 12 intermediaries comprising of the village bania, itinerant merchant or beopari, dalai, kutcha and pucca arhatiya, co-operative commission agents and wholesale merchants and the retailers. They function at various stages in the process of assembling and distribution of the produce. The existence of a long chain of middlemen reduces the, share of the consumer's price received by the actual cultivator. According to the findings of the Marketing Surveys, the share of producers in a rupee paid by the consumers ranges from 52Paise in the case of rice to 57Paise in case of wheat, in case of linseed it is 62Paise, in case potato 50Paise and in case of groundnuts 45Paise. 4. Multiplicity of Market Charges: Market charges are Those charges that are incurred by the seller or the buyer or both from the time a commodity enters the market for sale till the time the title of ownership of the goods is transferred from the seller to the buyer. In the course of transacting sale, or a purchase a number of operations involved which cannot be attended to by sellers or the buyers. These necessarily have to be done by the respective functionaries. In order to pay these functionaries, market charges are collected from growers or buyers at prescribed rates.

One of the main problems is The multiplicity of market charges and their heavy incidence on the producer-seller. In the absence of statutory regulations these charges are neither defined, nor are based on any service consideration and are recovered either in cash or in kind, and often both. These charges have no sanctions except usage or customs prevailing. They are always introduced in favor of the traders and the functionaries. On a sale of produce worth Rs.100, as much as 21.5% of the income of the producer goes to meet the various expenses: In the market the cultivator has to arrange with a kachcha arhatiya for the sale of his produce and in the larger markets he has to employ a broker or Dalal to get into contact with the kachcha arhatiya. For their services he has to pay some commission. In addition to the arhat paid to the arhatiya and the dalal, a number of other charges have to be incurred. Tulai has to be paid for the weighing of the produce, palledari to cover the cost of the labourers who help in unloading the cart, preparing the produce, filling the scale-pans, holding the bag open where the produce is being measured, etc. the seller has also to submit to deduction known as garda for impurities in the produce, and dalta for possible loss of weight and dana given to sweepers, watermen, and even beggars. During the measurement and in almost all the markets deductions are made from the amount due to the seller for dharmada or charity, dispensary, gaushalas, pathshalas. The objectionable feature about the market charges is that they are not only high but are also not clearly defined and specified. The charges vary from market to market and there is also no uniform practice as to charges that are borne by the seller and those that are borne by the buyer. Even within the same market the kachcha arhatiyas may charge lower rates to the village beoparis who visit the market often and have regular trade connections than to the farmer who visits market only occasionally and has, therefore, only small volume of business to offer to the arhatiya. To make things worse many of the market charges are taken in kind and in taking their shares the persons concerned are liable to be generous to themselves. As the Report on the Marketing of

Wheat in India points out, not only the arhatiya and dalal, but the munim (arhatiya's clerk), the chaukidar, the sweeper, the waterman, the arhatiya's cook and a horde of beggars of every description all regard themselves as entitled to a share of his produce. Some of these charges and deductions existing in the markets are: 1. Arhat (Commission) 2. Dallali (Brokerage) 3. Hamali (Handling Charges) 4. Tulai/Dharwari (Weighment) 5. Chalani (Sewing) 6. Borioto (charges for holding the gunny bags while filling) 7. Dhanak (charges for pushing the grain in the gunny bag on to a scale pan) 8. Charity 9. Karad (Deductions in kind for the quality difference) 10. Dhalta/Jhukta (leaving the balance in favor of the buyer) 11. Namuna (sample)(is shared by the commission agent and the buyers) 12. Baisari (charges for supervision of weighment to be paid in kind) 13. Munim (clerks allowance) 14. Valta/Wata (refraction allowance) 15. Bardana (rent for gunny bags supplied) 16. Rent for cart park 17. Rent for storage in godowns Charities Muthi (to be paid in kind for temples in the market yard) Darwada (cowsheds or Balajis fund) Pathshala (funds for schools in the area)

Some of these charges are highly outlandish like the farmer has to pay for various charities, which he would be otherwise not inclined to pay for. Also charges such as Shagirdi where the seller is supposed to pay fro the Arhatiyas sweepers and water carriers are uncalled for. Only some of these charges are justifiable. Among these are: Arhat or Commission Hamali Tulai Charges for sewing Any deductions in the name of charity in any kind are unwarranted. Similarly payments to the muneem or the apprentice of the Arhatya are uncalled for. Especially when the principle arhatya gets full commission for the services performed by him. Again there is no case for claming allowances for quality and weight where the produce is subject to thorough examination by the buyer before it is offered for sale. Hence in the light of numerous unwanted deduction and high market charges, it is suggested that markets be regulated. 5. Malpractices of Middlemen: Due to improper market structure traders or middlemen have become all powerful. They have bent the rules in such a way that it is possible for them to cheat and get away. Moreover the unorganized producers and the market machinery are no match to the powerful trader legally. Even in regulated government markets middlemen resort to malpractices. Some of the malpractices commonly resorted to by middlemen are as follows: a) Scales and weights are manipulated against the seller. This practice is rendered easier by the fact that there are no standardised weights and measures nor any provision for regular inspection.

There are all kinds of arbitrary deductions for religious and charitable purposes and for other objects. The burden falls entirely on the seller and he has no effective means of protest against such practice. c) Large quantities are taken away from the produce of the cultivator as bangi or sample. d) Bargains between the agent who acts for the seller and the one who negotiates on behalf of the buyers are made secretly under a cloth so that the seller remains ignorant of what actually takes place. e) The broker whom the cultivator employs is more likely to favour the purchaser with whom he comes into contact almost daily than the seller whom he only sees very occasionally. This tendency becomes all the more pronounced when, as it frequently happens, the same works for both parties. f) When disputes arise the cultivator has no means of safeguarding his interest. g) Differential prices for the same grade of produce h) Levying unfair charges for basic services i) Restrictive trade practices j) Arbitrary deductions on account of alleged adulteration and inferior quality Some of the practices obtaining in the market amount to nothing less than common theft. 6. Absence of Grading and Standardization: Although the agricultural produce (grading and marketing) act was passed in 1937 even today in most unregulated markets the practice of grading is unheard of. Whatever limited grading is accomplished is technical in character i.e., commercial grading, which can be understood by the lay farmer, is almost completely absent. If sales of agricultural produce at a higher price are to be augmented without personal physical inspection of every lot by open auction in the regulated markets, commercial standardization and grading are essential. Also if lots are to bulk through cheap and efficient warehousing and transport, standardization and grading becomes imperative.
b)

Absence of grading and standardising agricultural produce is another defect. The reputation of Indian agricultural producers in the worlds market is low. There are no standard grades commonly accepted throughout India even for such important commodities as rice and wheat. In the absence of certain standard grades accepted by the whole trade as the basis for commercial transaction, attempt of individual producers merely secures the ordinary market rate. In fact the present practice of dara sales, wherein heaps of both good and bad produce are sold together as one lot common in most markets, gives a premium to the inefficient producer as the good produce is made to carry along with it the poor stuff also. The practice of selling un-graded products of mixed quality has naturally reduced the reputation of Indian agricultural produce in the world markets. 7. Inadequate storage facilities: In most of the villages ryots store their produce in pits or receptacles variously known as kudurus, kallis or thekkas. In the upcountry markets produce is stored in kothis or kuthalas (earthen cylinders) and khattis (pits in ground lined with mud and straw) and in a few centres in pakka khattis made of concrete. But that there is a general inadequacy of good storage facilities both in rural and urban areas can hardly be denied. The indigenous methods of storage adopted in the villages as well as in most of the upcountry markets do not adequately protect the produce from dampness, weevils and other vermins. The losses due to inadequate storage have been estimated to range from 1.5% (Food grains Investigation Committee) to 2% to 2.5% (The Prices Sub-Committee) to 5% (as estimated by Dr. Baljeet Singh). A recent estimate puts the loss at from 5 to 15% by weight of the production and it is due to defective stage. This in turn is due to moisture absorption, excessive heat, insects, mites, rodents and birds. Even at 5% the loss of cereals, millets, spices, oilseeds, jute, cotton, tobacco would come to over Rs. 4,000 million every year in India.

With the change of temperature, grains loose weight. When wheat is harvested, it contains some moisture, which evaporates in summer and is regained during the monsoon month. Dampness raises the moisture content of the grain thereby making it soft and therefore susceptible to insects. The damage is greater when the grain is stored in kachacha underground pits where the sub-soil water table ranges from 8 to 10 feet below the surface. It is quite obvious that the food grains stocks held by co-operative societies, grain merchants and even by farmers are not kept in proper conditions. Therefore, the losses are substantially larger. In addition there are crops like jawar, pulses and maize, which are infested by stored grain pests even before harvest. The insects form inside the kernel and are visible until the threshed grains are put in storage. By the time the infection is detected, internal damage to grain becomes very great. Losses due to rodents are also very great. The rats start damaging the grain right from the field to the time it is consumed. According to Dr. P. J. Deoras, there are approximately 2400 million rats in India. He has estimated that about 20 rats could consume the quantity of food sufficient for one person. On a gross estimate this would mean that rats are spoiling at least one fifth of the grain produced. Calculating on this basis of a tonne of grain being consumed by 100 rats per year, the total consumption by the rat population of 2,400 rnillions would amount to about 24 in. tons. In terms of money this would come to about Rs. 18,000 million when calculated at the rate of Rs. 750 per tonne. The nature of damage studied by Dr. Deoras is as follows:(i) It has been noticed that apart from damaging crops and food grains in storage, rats carry food grains to their nests in burrows. As much as 15 kgs. of grain have been recovered while digging out nests from about 30 rats burrows. (ii) The rats damage 10 times the quantity of food material they eat. They would execrate about 86 faecal pellets in 24 hours, which would get mixed up with foodgrains.

(iii) They void 1 gallons of urine during the year, and further contaminate grain by shedding thousands of hair from their bodies. (iv) In Bombay as many as 9,000 bags of foodgrains are auctioned as they are unfit for human consumption because they are damaged by rats in yards and godowns. (v) The small mice in the paddy fields have been found to climb up to the paddy plant and eat every grain while the big field rat usually cuts the whole plant. Besides rats, Insects, beetles and moths are prolific and each couple lay anywhere between 100 to 400 eggs and their lifecycle is completed in 4 to 6 months. It has been estimated that weevilled grain in the case of wheat varies from 1 to 2% or more, peas one to 5% or more and arhar upto 2%. 8. Underdeveloped Transport System: Transport plays a very important role in the marketing of the agricultural produce. A smooth and efficient system of transport from the farmers village to the consumer door goes a long way in not only helping the agriculturalist to bring his produce to the market without much difficulty but also helping the consumer in securing his needs with a reasonable time and cost. In India with her vast distances, the existing means of transport are woefully inadequate. Communications from the field to the village andfrom village to the mandi are often extremely poor and defective. Bad roads, lanes and tracts connecting villages with the markets not only add to the loss of transportation and aggravate the strain on bullocks and other pack animals, but also lead to the multiplication of small dealers and intermediaries. They also restrict market by hindering cheap and rapid movement of agricultural produce. Thus the rural transport network is very bad. The railways established by the British have not been developed further and hence are inadequate by todays standards. Bad roads lead to delay in supply and also due to the time lag the produce may be damaged.

The bullock carts do most of the transport in rural areas. Some of the agricultural produce needs special storage systems even while being transported. Carts both pulled by bullocks or tractors cannot provide these kinds of facilities. Hence it is very much needed that an initiative be taken to improve transportation facilities. 9. Lack of Marketing Information: The importance of an efficient marketing new service particularly for the producer-seller in regulated markets hardly needs any emphasis. This news service acquaints him with the ruling price and thereby strengthens his bargaining power and position. The price information if available grade wise helps him to know the approximate returns he is likely to get for his produce. It also induces him to produce better quality crops and thus raise the standard of farming. Generally the producersellers have to depend upon oral information about market conditions, market arrivals, demand conditions, ruling prices and market trends etc. that reach them through village sahukar or commission agent or their own neighbors. Absence of market intelligence as to prices is another defect. The villagers have practically no contact with the outside world nor are they in touch with the trend of market prices and they mostly depend on hearsay reports received from the village bane who is not at all interested in supplying them the correct information as to prices obtaining in the wholesale market. Even in cases where information as to prices is available prices are not comparable on account of: 1. the lack of standard grades acceptable to the whole country 2. variation in the amount of refractions allowed and the terms of standard contracts obtaining in different markets 3. inaccuracy of information supplied by various agencies concerned 4. variation in the price quotations give by the local and Central government 5. The considerable variations in weights and measures used in several markets in the absence of standardisation of weights and measures.

10. Cost of Borrowing: The most important requirement of growers to facilitate their production activities is credit. Though cooperative credit has been increasingly spreading its fold in the agricultural sector it is still far from occupying a pre-dominant position. The cultivator is financed by the village sahukar-cum-trader who is in his own turn financed by arhatiya and the indigenous banker. In the absence of warehouses and the lack of facilities for making advances against the security of warehouse receipts there cannot be any system of cheap finance against security of goods. There is at present no proper link between indigenous bankers or commercial bankers and The Reserve Bank of India. The various marketing agents borrow funds at a high rate of interest. This naturally leads to a rise in the cost of marketing with the ultimate result that the share of the price received by the producer is correspondingly reduced. The case for borrowing private finance and the flexibility in the repayment make it attractive despite many malpractices. Through various surveys it has been proved that though government has taken active measures to provide cheap institutional finance a large majority of farmers are dependent on private moneylenders and commission agents in obtaining credit. It may be noted here that the activities of traders and commission agents through money lending curtail the freedom of the grower-seller to dispose off their produce profitability in market yards and make them permanently indebted. The official machinery has to realize the gravity of the situation and take effective steps to realize the poor and innocent agriculturist from the clutches of the moneylenders cum commission agents. 11. Multiplicity of Weights and Measures Till recently, there had been an absurd multiplicity of weights and measures in India. The chaotic state of weights and measures in India has been more clearly brought out in all the reports published by the Central marketing staff. Weights made of sticks, stones and bits of old iron are common feature in the markets and villages.

This multiplicity of weights and measures employed in India has deplorable effects in several ways. Firstly, it affords greater opportunities for cheating the ignorant cultivator and unscrupulous dealers readily avail themselves of such opportunities. Secondly, it gives rise to needless complications in practice as between one market and another, which is by no means conducive to the interests of trade and commerce. Thirdly, for the collection of data on price movements the relative level of prices in different regions, the volume of agricultural production, etc. lack of standard weights and measures is bound to be a great handicap and seriously affects the accuracy of statistical calculation. The multiplicity of weights and measures make supervision difficult and afford greater opportunities for cheating the producers, creates an element of uncertainty in trade and renders fraud on the part of retailers as easy as it is profitable. The report of the Marketing Sub-Committee has rightly observed that, Deliberate malpractices, ignorance and carelessness have all combined to make the consumer in India pay an unnecessarily high price for many goods of different quality. 12 Adulteration: Adulteration is often resorted to while marketing crops and one of the most important reasons for such deliberate adulteration of agricultural produce is the high amount of refraction (khad) allowed in most markets and the non-mutual terms. In most of the wholesale markets in the producing areas a fixed deduction is made for impurities (say 5%) and the terms are non-mutual, i.e., a producer offering, cleaner produce which has only 1 % of impurities receives the same price as the producer offering produce containing 5% impurities. Naturally when this is the case the seller whether he be the middlemen or the farmer takes care to see that the produce is adulterated to the maximum limit allowed in the market. Adulteration of Commercial Crops

Various devices of adulteration are in vogue. Such as: Damping of cotton is done by the middlemen on the contention that the kapas comes in so very hot that if one puts one's hands into it they would grass while curry powder in several cases has been found to be heavily adulterated with horse dung. Tomato sauce is often only a mashed pumpkin with a small percentage of tomato, Vinegar in some cases has been found to be acetic acid. Small chippings of white stone have been found in rice in some localities. Most of the common salt contains large-quantities of white chalk, while turmeric is adulterated with lead chromate which has a deep Yellow colour. In red chillies, many unscrupulous traders use lead oxide to brighten the colour and add weight. Note : If the question on defects in agricultural marketing is asked for 10 marks, please explain each point in short (around 1 or 2 paragraphs) Each of the above points can be asked for 02 marks also, hence prepare yourself accordingly, filter the data & decide what to write. The points like problem of middleman, Grading & standardisation , storage, transportation, marketing news, weights & measures can be asked for 10 marks. In such cases you will first discuss problem & the line of improvement associated with such problem. Lines of Improvement Due to various defects in the agriculture market of India the traders (middlemen) occupy a unique position and due to such a unique position, the traders succeed in manipulating the market scenario and to take home a major proportion of the price paid by the consumer. In some cases like rice nearly 48% of the prices charged to the final consumer is siphoned away by the middlemen. A very small proportion of the consumers paid up price actually goes to the producer-seller. It has been observed that well regulated markets create in the minds of cultivators a feeling of confidence. The producers believe that they get a fare deal in these regulated markets. Such a

scenario provide for a mood where the farmer is willing to accept new ideas and strives to increase his agricultural produce. The value of such regulated markets thus can be exaggerated but it is yet to catch on in India. If the agriculturalist in India is to receive a higher price for his produce, if the needs and preferences of the consumer are to be conveyed to the producer with a minimum amount of delay and friction, and if the large scale industries are to secure a steady and reliable supply of raw material of uniform quality, obviously the defects in machinery for marketing of agricultured produce should be remedied as quickly as possible. It would be useless to increase the output of food, it would be equally futile to setup optimum standards of nutrition, unless means could be found to move food from the producer to the consumer at a price, which represents a fair remuneration to the producer and is within the consumers ability to pay. Similar considerations also apply to other agricultural products and to fish and forest products. It is therefore necessary to remove the defects in the machinery for marketing of agricultural produce. An improved system of agricultural marketing, which will secure for the cultivator a larger proportion of consumers price is a sin qua non for agricultural improvement in India. The following are the various Lines of Improvements: 1. Establishment of Regulated Markets 2. The market yard; amenities and facilities 3. Use of Standard weights and measures 4. Increased Provision of Storage and Warehousing facilities 5. Improvement of transportation facilities 6. Provision of marketing news 7. Standardization of contracts and payments of sales proceed 8. Improvement in Grading and Standardization

9. Remunerative Prices for Farmers 10. Development of Co-operative Marketing Note : If the question on removing defects in agricultural marketing is asked for 10 marks, please explain each point in short (around 1 or 2 paragraphs each). Points like Market yard, provision of marketing news, remunerative prices for farmers can be asked for 02 marks, hence prepare yourself accordingly, filter the data & decide what to write. The points like regulated markets, Grading & standardisation , storage, marketing news, weights & measures can be asked for 10 marks. In such cases you will first discuss problem & then the line of improvement associated with such problem. Try to enrich your answer with examples. 1. Establishment of Regulated Markets: (What is Regulated Markets?) Most of the defects and malpractices to the disadvantage of Producer-seller can be removed by the exercise of proper control over markets and this could be done by the establishment of Regulated Markets in the country. Markets may be regulated either by local bodies or under State legislation. As a result of the rationalisation of market charges alone, the producer-seller is benefited to the tune of 3 to 5 rupees for every 100 rupees worth of produce marketed by him in these markets. Besides, there has been the reduction in the market charges varying from 28% to 69% in various markets. There has also been an increase in the number of sellers bringing their produce to these markets. Until 1944 less than 40% of the produce was taken to the markets by the producers themselves. The average percentage has now gone to 70%. 2. The market yard; amenities and facilities: A market yard is A statutory declared area situated within the market proper where all sellers of the notified commodities are supposed to bring them and affect transaction with licensed traders

directly through the other license intermediaries under the supervision of the employees of the committee. The market yard is the nerve center for the performance of the activities of a regulated market. A well laid out market yard includes the provisions of certain basic amenities and facilities. Normally a market yard acquired amenities and facilities such as auction halls or platforms, godowns, market office, space for parking carts, drinking water, rest houses, sanitary arrangements, cattle shed, internal pucca roads, canteen, lighting facilities, post offices, banking facilities, etc. However no market yard can actually claim to have provided all amenities and facilities laid in the standards for regulated markets formulated by the Indian Standard Institute (ISI). 3. Use of Standard weights and measures: The weighing of agriculture produce is an important aspect in the working of a regulated market. It influences the actual earnings of producer-seller and also their perception of the transaction fairness. There are many malpractices connected with weighing and weighment. Some of the traders resort to using unauthorized and faulty weights and scales. Then there is a problem of conventional and marginally over weighment. The buyers demand access weight allowances and insist on arbitrary deduction for counter balance. They also resort to very unethical practice of free taking away of excess left in the lot after weighing. All such malpractices rampantly co-exist due to the absence of an impartial and independent agency for weighing. There is also a complete absence of uniform weighing charges or weighment. The lack of any fixed procedure of supervisors over the actual weighing process is also responsible for the situation. The multiplicity of weights and measures has deplorable effect on the market scenario. The traders take full advantage of the situation and cheat the ignorant cultivator on every available or possible occasion. Further the multiplicity of weights and measures makes supervision difficult. It creates an element of uncertainty in trade and renders scope for fraud.

Mostly weighing of agricultural produce in most regulated markets is done wholly within the premises of the market yard. The produce is weighed by different licensed weighmen simultaneously at different spots in the yard. Depending upon the nature of the commodity the procedure of weighing differs. Mostly it is done lot by lot by the same weighmen, sometimes if a seller has a high amount of produce to be weighed he engages the service of more than one weighmen. The system adopted however depends on the availability of sufficient number of weighmen, the number of licensed weighmen, in turn it is determined by the size of the market, the frequency, the scale of the commodity arrivals and the possibility of earning sufficient daily income by way of charges collected. It is however observed that in many regulated markets across the country the number of licensed weighmen was small. Many times it so happens that though the sale transaction are over in the morning the growers have to wait for getting their produce weighed till late in the evening and may be even overnight. This shortage of weighmen in all the markets is due to the fact that the market committees are averse to issue more and more licenses to weighmen. Their logic is that if more weighmen are given licenses the earning of the existing set of weighmen would be adversely affected. Many suggestions to the improvement in the scenario have been given by various national level committees. It is suggested that the market committees should expedite the process of issuing license to weighmen in the interest of the producer-seller. It is also suggested that the market committees should themselves provide weighing and measuring equipment as against the present practice of traders using their own equipment. The use of standard weights and measures safeguards the interest of parties against cheating by false or under-weight. It is even now more urgently needed in rural areas in regard to transactions in which the farmer is concerned. The Planning Commission has recommended to adopt the metric weights and measures throughout the country because it is simple, easier to learn and remember; and

its use would save time and labour in calculations. The Standards of Weight and Measures Act has been passed in 1958 and enforced in all the states with a view to check fraudulent views of weights and measures. According to a survey it is estimated that 80% of the transactions were deemed to be proper and fair as 20% is not a small figure. This 20% of malpractices can be eradicated if there is an efficient supervision by authorities of the market at time of weighing. It has been observed that the surprise inspection weapon provided to the market committees with respect to weighing provisions is a failure. This is because most market committee member is honorary and thus indifferent to pay such visits and invite trouble. Also the employees appointed as inspection staff by the government are far too inadequate in number. Also this inspection staff (agricultural supervisors) is in the habit of taking bribes from the commission agents and traders for conniving at improper weighing. The surprise visits made by the market securities are rendered ineffective as a result of before hand knowledge of the visit to the supervisors and licensed weighmen. Thus here again it is suggested that market committees take the punitive actions against offenders and check these malpractices. Further it is suggested that the weighing work among the licensed weighmen should be given on a rotation basis. This will minimize the collusionary group affiliations and thus reduce the malpractices in weighing agricultural produce. Besides the check from the authorities the grower can also do a lot to eliminate weighing related malpractices. The grower should be diligent and meticulous with respect to the procedure of the weighing laid down by the authorities. The grower should also take the trouble of weighing the produce at their own end before bringing it to the markets. It is observed that the grower seldom do this and thus the loss on this account is sizeable. 4. Increased Provision of Storage and Warehousing facilities: It has been well said that the business of accumulating and storing perishable as well as nonperishable products in times of flush production, preserving them safely and then distributing them

in times of scarcity is necessarily a part of production and equal in importance and dignity. By holding back a part of the surplus at harvest time the middlemen prevent a sharp fall in prices of commodities so that the producer's share in the benefit is increased and by letting out produce from the store in seasons when prices are normally likely to rise sharply, they check the rise and bring about some stability in market prices which benefits the consumer immensely." Storing is, therefore, a very important part of marketing. This point was realised by the Royal Commission on Agriculture and subsequently supported by the Central Banking Enquiry Committee. Storing goods, before they are sold is an important part of marketing. This point was fully realised by the Royal Commission on Agriculture and subsequently supported by the Central Banking Enquiry Committee and later on by the Agricultural Finance Subcommittee, the Rural Banking Enquiry Committee and by the Rural Credit Survey Committee. All these bodies recommended that storage and warehousing facilities should be made available at all nuclear points of trade in agricultural produce. As mentioned in the previous section, losses in storage are due partly to the change in temperature, dampness and partly to insects etc. These losses in temperature can be reduced by making provision for efficient ventilation in the godowns and by closing them during the monsoons and keeping them open during the dry season. Grains in bags can also be protected by damage. It is necessary that sufficient space be kept between the bags while preparing a stack-plan. Storage of farm produce is one of the essential elements of orderly agricultural marketing. It is necessary at various levels to varying degrees. The method of storage at the primary market level depends upon the prevailing traditions, value and the retaining capacity of the commodities to be store, the availability of facilities for storage and the waiting capacity of the producer-seller. Due to the lack of storage facilities that are adequately and efficient the losses are great. Realizing the need for good storage and warehousing facilities the Indian parliament in acted the agricultural produce (development and warehousing) Corporations act in June 1956 in order to

accelerate the efforts of building warehousing; the government subsequently passed the warehousing corporations act in 1962. Accordingly the national co-operative development corporation, the central warehousing corporation (CWC) and the SWC in each state came into existence. A 3 tier storage system was suggested by various committees viz. a. The National Level b. State and District level c. Village and Rural level In accordance with these suggestions, the food corporation of India and the CWC created storage facilities at centers of all India importance. The state government and the SWC made warehousing and provided for storage facilities at centers of state or district level of importance. Over and above all this villages / Rural storage needs are been looked after by the co-operatives. These efforts have had a mixed impact but definitely the storage capacity over all has gone up considerably. Further the government of various states has issued private operators licenses to build and run scientifically designed warehousing and other storage facilities. The licensed warehousing offers other distinctive benefits. The private warehousing storage receipts are transferable and thus the ownership of the goods can be transferred without the actual movement of produce. The scientific storage eliminates lose from spoilage. The private warehousing also provide for insurance cover against fire, flood and theft. They also help the grading and standardization of various commodities. 5. Improvement of transportation facilities: Right means of transport at the right time is essential for the smooth functioning of any market. This kind of a facility at reasonable rates will influence substantially the working of market mechanisms. It has been observed that the cost of transport directly affects the price of the agricultural produce.

All involved in agricultural marketing i.e., the farmer, trader and the consumer are affected by the shortage of transport facilities. The market committees are under no statutory obligation to provide for transportation but the nature of the problem is such that it is suggested that they step in. It is the fact that most farmers due to regulated markets would like to sell their product directly at secondary markets but not at village assemblies centers. However due to bad transportation facilities the farmers are not willing to take the risk of transportation. Here is where it is suggested that the market committees take upon them some responsibility. They should organize some trucks or lorries for the transport of the produce of small farmers from village assembly centers to urban secondary markets. The fact is that the produce of just one farmer may not be enough to fill in an entire truck. Hence the market committees should help coordinate 2-3 farmers to pool their producer together so that an entire truckload is completed. The cost of such facilities provided could be recovered from the sale of the produce. The method suggested above can be executed as follows: a) The individual grower-seller may record their transport requirements with the market committee. b) The committee after receiving such requisition pools them and contract lorry supply offices, thus arranging for the transportation. c) As mentioned earlier the cost of coordinating and transporting can be deducted from the sales proceed. Similarly to assess the traders in having adequate transport facilities, the committee officials may contact transporters as well as railway authorities in obtaining the required number of lorries or wagons. This would reduce substantially the transport bottlenecks thus benefiting both the farmers as well as the traders. The markets will also function continuously without the need for closure for want of transport.

6. Provision of marketing news: The Agricultural Commission had recommended that steps should be taken for a better dissemination of the marketing news. The marketing surveys conducted under the direction of the Central marketing staff have shown that there is at present a surprising lack of co-ordination as between different markets. Prices do not move in harmony even in markets, which are not far from each other. We often find a market glutted with a produce which is scarce in another perhaps only a few miles off. The problem of lack of marketing information was discussed earlier. Now having realized the need for a good agricultural marketing news service, the government of India through its 5 year plans has allocated some budget for this activity. The government of India in collaboration with the various state government help, setup of an all India market news service in the 2nd 5year plan. This mainly benefited the farmers, as initially almost all the news relayed from these centers was agricultural in nature and market oriented. In 1957, the integrated scheme for the improvement of market intelligence was launched in Bombay. The main objective of this was to give uptodate information to the producers with regards to the wholesale prices of agricultural commodities ruling in various markets. This scheme covered two aspects viz. a. Collection and compilation b. Information dissemination Since then the government has given a lot of importance to improving the quality of agricultural marketing news services. All India radiobroadcasts daily, the closing of agricultural commodities and gives information regarding prices. The penetration level of the radio set is almost 90% hence the broadcasts are very useful.

Thus the objective of an efficient market news service should be to aid towards more intelligent production with the ultimate object of achieving effective distribution and fair pricing of farm produce both for the producers and the consumers. 7. Standardization of contracts and payments of sales proceed: Business practices worldwide show that the best time to sell ones produce is when the prices are high. Hence the farmer world over stock their produce in anticipation of a price rise. However in India the farmers are very poor and small. They have no waiting capacity to store the harvest produce for a favourable selling time. When they bring the produce to the market their immediate goal is to sell and obtain cash. The traders take advantage of this situation. The mode of actual payment of sales proceed differ from region to region, market to market and within the same market from transaction to transaction. Most of these modes are exploitative. Some of these methods are: Instead of prompt payment of the total value of the produce purchased, payment by installments is forced on the seller. This happens usually after the delivery of the entire purchase lot. In cases where the moneylenders are the buyer it is seen that they make direct adjustments in the debt accounts of the sellers who have earlier borrowed funds from them. The farmers being uneducated, ignorant and illiterate seldom understand such adjustments. Most traders insist that all transactions should be on credit and make the seller agree to this. If they cannot convince the seller for a credit transaction they deduct exorbitant amount for cash payment. Almost all marketing charges of transport, storage and weighment are pushed on manipulatively to the seller. The buyer behaves as if these are traditional practices and if

changed will result in some thing on toward happening. Thus the seller is forced to follow such rules of thumb. With the setting up of regulated markets all such irregularities can be eliminated to a large extend. The market legislations have clearly provided for insuring prompt payments. But the problem is of implementation. If is recommended that market committees play an active role in implementing such legislations. It is expected that at least this will make direct sales in the markets free and fair. However in the case of indirect sale the system of payment by the buyer to the commission agents is more governed by trade convictions. The commission agent may not necessarily recover the amount from the buyer immediately on delivery of goods. There may be a time lag between the delivery of goods and the payment by the buyer, which generally varies. Further it is seen that the commission agents in most of the markets follow the practice of calling on to get their payments. This is particularly so in the case of certain commodities like cotton and groundnuts. The buyers of these commodities are generally the processing factories, which make payments at their own premises. It may be noted that due to this practice of deferred payments the commission agents demand a higher rate of commission from the producer-seller for prompt payments or result to a system of deferred payments to the farmer. Due to the cash crunch in Indian markets such deferred payments or forward training cannot be avoided. In order to stop unhealthy speculation, forward training of agricultural commodities is regulated under the forward contract regulation act 1952 for enforcing the act the forward market commission was set up in 1953. This commission identified forward markets in raw cotton, groundnut oil, coconut oil, black pepper and other oil seeds. As a policy measures the commission has sort to eradicate monopoly of any kind.

As far as the operations of moneylenders are concerned they are governed by the Bombay Agricultural Produce Market Rules of 1941. The rules state that licensed general commission agents or brokers could give advances either in cash or in kind to the agriculturalist on the condition that 1. If an agreement was entered into between the moneylender and the borrower, the lender should supply a copy of the agreement to the borrower and 2. The lender should keep an account book, recording all advances made by him to an agriculturalist and repayments affected in the manner specified by the committee in its byelaws and should supply a copy of an account book, under his signature, to the borrower, entering therein every load transaction and its recovery However the committees have practically no direct control over the credit activities of the traders, general commission agents and the brokers. As co-ordination between the working of the market committees and the administration of the moneylenders act should be attempted. 8. Improvement in Grading and Standardization: Grading of commodities has 3 main purposes. Firstly it protects the consumers and the producers through the establishment of standards of quality. Secondly it serves as a mean of describing the quality of commodities to be purchased or sold by buyers and sellers all over the country. Thirdly it provides a basis for the payment of premium on the quality of commodities. Further trading on the basis of accepted quality standards makes pricing more precise and equitable. Thereby making the price reporting mechanism more meaningful. In India grades, standards and appropriate trademarks have been developed under the agricultural produce (grading and marketing) act 1937. The agricultural produce is graded under the trademark AGMARK. This is done in order to ensure good quality both for export as well as the domestic market.

The act provided for the fixation of grade designations, which indicate the quality of scheduled commodities of agricultural produce. The grading for other commodities is voluntary. The grading practices of produce at the farmers level need to be emphasized and widely canvassed. This will (it is hope) fetch a competitive price to the grower in the markets compared to the ungraded produce. 9. Remunerative Prices for Farmers: It has been increasingly realised that mere increased production could be of little avail so long as the excess production failed to reflect itself in the shape of some extra income to the producer. How to ensure an economic and remunerative return to the producer; how to establish a relationship between the price return and the quality of a produce; how to provide a self-propelling incentive for the maintenance of a standard which will bring the maximum return: how to prepare the produce for the market, how to grade and differentiate how to pack and transport; what security and what facilities the producer should get in the market; how to keep him informed of market trends and prices; how to keep him abreast of consumer preferences these have been some of the questions which demanded close attention of those concerned with the agricultural marketing. 10. Development of Co-operative Marketing: With the commercialisation of agricultural products efficient marketing is as necessary as scientific agricultural operation and so side by side with the progress in cultivation methods of suitable machinery for the efficient sale of farm produce should also be made. The income of the farmer depends to a great extent on the ability with which he is able to market his produce for a fair price. Even if the production side is strengthened and cultivation improved, the cultivator would not gain much, if there is no proper arrangement for the marketing of his produce as the benefits of better farming would probably be reaped by middlemen intervening between them and the ultimate

consumer. It has, therefore been recognised that defects of agricultural marketing may be removed by organising the work through co-operative societies. Regulated Markets What are Regulated Markets? Markets that have rules and regulations with respect to the price of the product sold, the method and the produce in which the transactions take place are other similar market operations are said to be regulated markets. These regulated markets ensure a fair and level playing field for all viz. the producer, middlemen and buyer. This is done by eliminating the malpractices at the grass root level. There are members from Govt., Traders & farmers in the regulated market committee. Establishment and Regulation of Markets in India The most effective and direct measures to improve the conditions of the markets as taken by the government through regulating the markets and the market practices by legislation. The common objective of the various acts for straight agricultural produce markets is to bring all the parties that is the producer, the commission agent and the buyer to the same level of advantage by eliminating malpractices and rationalizing market charges. The regulated markets provide a unique system of marketing that is only beneficial to developing countries like India. In developed countries besides government legislation semi-independent commodities, commissions or corporations or producercontrolled boards are set up under various acts. These boards, commissions, corporations function to regulate and develop marketing. Added to this cooperative marketing has also made good progress in some developed countries?

In India the situation is however different. Indian producers find it most convenient and least troublesome to sell agricultural produce in the unregulated primary village market. Nearly 2/3rd of the marketable surpluses of all agricultural commodities are disposed off (sold) in such markets. If the farmer comes to the assembling center for sale, in non-regulated markets, he is liable to be deceived by the commission agents or broker or traders. Sale through the cooperative society has not been possible because of the failure of the cooperative movement in India. At the same time the marketing methods followed in advance countries like the establishment of producer controlled marketing boards are not possible in our country as it is difficult to organize such boards on account of small and scattered producers thus the only option left is the regulation market practices in existing unregulated wholesale and retail markets. Regulated markets in India The first attempt to regulate the Indian agricultural market was made as early as 1886. Karanja was the 1st regulated market in India. It was situated in the then Hyderabad residency. The process of regulation received wider acceptance in 1918 when the General Cotton Committee appointed by the government of India recommended regulation of market as a solution to agricultural marketing problems. In pursuance of this recommendation, the then government of Bombay was the first to enact the Bombay Cotton markets act in 1927. Infact, it was the first law in the country which attempted the regulations of markets with a view of evolving sound market practices which are fare to the producer as well as the trader Since then further act have extended the scope of agricultural legislation to the commodities other than cotton. Today market legislation in India covers almost all agricultural as well as horticultural produce, livestocks and these products and forest produce. However since the regulation of markets is a state subject, these are some variations in the state legislations.

Most of the regulated markets now functioning are, by and large, multi commodity markets. There is however some markets, which deal in simple commodity, like tobacco, vegetables or livestock. Although legislation provides for the regulation of all types of products in actual practice only some important commodities have been so far brought within the preview of enact. It would, however, be advantageous to the producer-seller if all the commodities are grown in the market are brought within the orbit of regulation. This enables the producer-seller to dispose off their entire marketable surplus in one and the same market. It is, therefore highly desirable that all agricultural commodities, which are commonly grown in notified areas and for which there is a fare marketable surplus, should be included amongst the notified commodities for the markets. Several committees have also recommended this from time to time. The poor standard of primary and secondary commodity markets where producers convert their produce into cash, the prevalence of various malpractices such as short weights, excessive market charges, unauthorized deductions and allowances made by commission agents, adulteration of produce and the absence of machinery to settle disputes between the seller and buyers were recognized as the main hindrances in agricultural marketing as early as 1928 by the Royal Commission on agriculture on a national scale, which by observed that these can only be removed by the establishment of regulated markets. A regulated market is a market that has rules and regulations with respect to the price of the product sold, the methods or the procedure in which the transactions take place and other similar market operations are said to be regulated markets. These regulated markets ensure a fair and level playing field for all viz. the producer, middlemen and the buyer. This is done by eliminating the malpractices at the grass root level. Progress of regulation in India

Regulation of markets in India is today a state subject. The directorate of marketing and inspection at the central level render advice in farming market legislation and its enforcement. In 1938 a model bill was prepared by the central agricultural department (now known as Directorate of marketing information). On the lines of this bill several states drafted and passed their own bills. The progress of regulation was very slow due to the 122 markets were regulated till the end of the war. After independence the planning commission in its 1st and subsequent 5 years plan emphasis the vital role played by regulated markets. Due to this the number of regulated markets grew rapidly after independence. The number of the markets increased from 432 in 1950 to 3631 in 1976. A number of steps have been taken in the last 50 years to regulate markets. These are aimed at regulating marketing practices, standardizing weight and measures, developing certain infrastructure facilities in assembling markets and introducing quality standards AGMARK certificate. Though the legal framework has been provided in those state the progress is uneven hence its suggested time and again that: a) A further expansion of the regulated market system in terms of both market and commodities to be brought within the scope of regulation. b) Strengthening the arrangement of enforcement and inspection to ensure a regulated system of open auction, trading practices and margins of intermediaries. c) Development of rural markets and shandies and establishment of rural markets in areas where such facilities are not available. At the central level financial assistance is being provided to select regulated markets for establishment of grading facility for some important items at the producers level. Some schemes are also assisting the development of infrastructure facilities in selected regulated markets both primary and wholesale levels. But despite this the progress is not very satisfactory. Quite a sizeable size of markets remains unregulated even in this day and time.

Benefits or advantages of regulated markets: Regulated markets have many advantages over unregulated ones. Economically the producers gains by way of reduction of unwarranted multiple market charges and unauthorized market deductions. Socially it profits the producer as he is now directly involved in the management of the market communities. This provides him with a platform where he can discuss matters concerning his interest and give bent to his grievances. Psychologically the producer occupies a dominant position in the market community and faces the trader with greater confidence. Market the social and economic benefits accruing to the cultivators, as a result of the regulation of markets may be briefly enumerated as below: 1. As a result of the rationalization of market charges alone, the producer-seller is benefited to the time of 3-5Rs for every hundred Rupees worth of produce marketed by him in the regulated markets. It works out to be 15-25lakhs on rupees in respect of markets with an annual turnover of 5crores of rupees. This is no small benefit to the tiller of the soil. Besides there has been a reduction in the market charges which varies between 28&69 % inn various markets. 2. There has been an increase in the number of sellers bringing their produce to these markets. Until 1944, the producers themselves took less than 40% of the produce to the markets. The average percentage has now gone up to 70%. 3. Markets charges are clearly defined and specified. Excessive charges are reduced and unwarranted ones are prohibited 4. Market practices are regulated and the undesirable activities of the market functionaries are brought under control so that a fair dealing is assured 5. Correct weighment is ensured by periodical inspection and verifications of scales and weights. Only correct and stamped beam scales and weights are allowed to be used in the market. 6. A machinery for the settlement of disputes between traders and sellers is setup this machinery provides suitable arrangements for the settlement of disputes regarding quality, weighment and

deduction prevent litigation, safeguard the interest of the seller and smoothens business by creating good relation between sellers and buyers. 7. Reliable and up to date market news are available to the sellers. 8. Proper market yards with full facilities like sheds for the sale of produce, cart parking place, better grading and warehousing facilities for accommodation of agricultural produce are duly provided by the market committees. 9. Open auction methods are strictly followed and unjustified trade deductions like karda, dalta, batta namuna etc are eliminated. 10. In these markets suitable quality standards and standard terms for buying and selling are conveniently enforced. 11. Besides reliable statistics of arrivals, stock and prices are easily available. Thus regulation of markets has been a boon to the agriculturalists. It has not only introduced a system of competitive buying, helped to eradicate undesirable malpractices, rationalized market charges, standardized weights and measures, protected cultivators from authorized deductions and unduly low quotations but has also developed a machinery for serving impartial settlements of disputes between the practices. Taking the overall picture, regulated markets have produced a wholesome effect on marketing structure and have generally raised the efficiency of marketing at the primary level. Steps have to be taken in the future not only to bring the remaining assembling and terminal markets but also the primary markets under regulations. Note: if the question of 10 marks is asked on regulated market, write down what is regulated market? What is need of regulated market ( write defects in Agricutural Marketing that can be removed by establishing regulated markets), benefits of regulated markets & then scenario in India in short.

Co-operative Marketing The Co-operative Development Corporation The National Co-operative Development Corporation has been promoting and financing a wide range of economic activities in rural areas through co-operatives. The Co-operative is a unique institution in the country catering to the development of the rural economy and agriculture sector through co-operative. There is no other institution in the country which is exclusively for meeting the requirement of co-operatives. NCDC has been playing special attention to weaker sections cooperatives in various part of the country. The promotional and development role of NCDC had lead to continuous diversification and expansion of co-operative programs under its preview. Co-operative Marketing Society When producers of agricultural commodities or any other product form a society with an objective of carrying out marketing of their produce, such society is called as co-operative marketing society. The need for co-operative marketing arose due to many defects observed and experienced in the private and open marketing system. Those are 1. Several malpractices prevail in the marketing of agricultural produce. For example, arbitrary deductions from the produce, manipulation of weights and measures and cheating the farmers, collusion between the broker and the buyer while fixing the prices, delay in payment of amounts due to farmers, etc. The result is the farmers are indebted to trader - moneylender. In

such circumstances co-operative marketing society can largely help the farmers reduce the malpractices and offer honest and correct services. 2. There exists a chain of intermediaries between the producer and the final consumer. They include village merchant, itinerant trader, wholesaler, commission agent, pre-harvest contractor and retailer. They take their own margins for the services, they render. But these margins are generally ex-orbitant, making the commodities costly for the consumers and reducing the producer's share in the consumer's price. A co-operative marketing society can eliminate some or all of the intermediaries and can reach to the consumers and establish direct trade relations with them. This will make commodities cheaper to the consumers and also ensure good quality of produce to them because much of the handling is avoided. 3. There are some services such as transport, storage, financing, grading, packing, loading/unloading which are carried out by some private functionaries who charge high rates for these services. A co-operative marketing society performs these services efficiently and at cheaper rates. 4. A co-operative marketing society provides market finance to farmers and ensures better returns to their produce. Besides marketing society can act as an agent of credit co-operative society and help to recover loans advanced by credit societies. At present, most of the financial needs of the farmers are fulfilled by trader - moneylenders at very high rates of interest and with the condition that they will sell their produce through them. This can be avoided, if there is cooperative marketing society. Organization: Under the system of co-operative marketing whole responsibility of marketing is taken up by the farmers themselves, organized on co-operative basis. The area of operation of marketing society

is usually fixed with reference to local conditions - area based or commodity based. The commoditybased societies related to grapes, oranges, banana, pomegranate, etc. have wider jurisdiction covering the major areas growing each crop. There are societies at the producer's level and they federate at state or national level to deal with bigger markets including foreign markets for export of their produce. Membership: Membership of a co-operative marketing society is open to individual farmer who produces the crop for which the society is formed. Other co-operative societies in the area can also become institutional members. Resources: The sources of fund of the society are as under: 1. Share capital 2. Deposits. 3. Loans from higher financial institutions including NABARD. 4. Grants or subsides from the Govt. for godowns, etc. 5. Reserve funds. The marketing societies require short-term, medium-term and long-term capital 1. Short-term capital is needed for financial advances to members for production, packing, transport, etc. to meet contingent expenses. 2. Medium- term capital is required for purchasing motor trucks, etc. 3. Long-term loan is required for installation of machinery, construction of building for godown, storage, etc. Functions: 1. To arrange for the sale of members produce to the best possible advantage.

2. To undertake activities in connection with grading, pooling and procurement of produce of the members. 3. To provide storage facilitates to their members by renting or owning the godowns and thereby facilitate to grant advances against pledge of produce. 4. To protect members from all types of malpractices eliminates the middleman in the chain of marketing. 5. Co-operative marketing society ensures grading, etc. and supply of good quality material to consumers. 6. It teaches business methods to farmers and serves them as agency for supply market information. 7. The society is able to stabilize prices over a long period by adjusting the supply with the demand. 8. Marketing societies are also encouraged to undertake export trade so that they can give better prices to their members. Weak Co-op. Marketing: Although, many advantages are envisaged in the co-operative marketing the structure has remained relatively weak as compared to credit co-operatives. There are only about 1000 marketing societies as against 20,000 credit societies in Maharashtra. Their marketing is more difficult involving many technical and commercial aspects. Marketing of perishable is still more different. Arranging quick transport, arranging storage to avoid losses, to keep watch on demand - supply position to ensure good prices to members are all matters need for good marketing. For want of these managerial aspects, desired number of co-operative marketing societies has not come up and those which were started could not succeed. Several marketing surveys/studies at farmer's levels have revealed that among several marketing channels, co-operative channel has offered greater share of

consumer's prices to the producers. Whichever, marketing is unorganized, farmer - producers have expressed that marketing co-operative societies should be formed. This was particularly reported in the cases of marketing of perishables. Few Successes: Inspite of the difficulties encountered in the marketing of perishables like fruits, vegetables, milk, etc. there are few examples of good success. i. Maha-grape - co-operative federation marketing grapes in Maharashtra. ii. Co-operatives marketing pomegranate. iii. Co-operatives marketing banana in Jalgaon district. iv. Vegetables co-operatives in Thane District. v. Milk co-operatives in Maharashtra and Gujarat. vi. Co-operative cotton marketing societies. Note : 10 Marks question appear on this part State Trading State trading in its narrow sense means import and export transactions of a state-owned or state controlled agency involving purchase of goods on commercial sale. In a broader sense, it includes purchases from abroad for governmental use and disposal of surplus stores originally purchased for governmental use. A Report prepared by the E.C.A.F.E. Secretariat defines state trading as Direct participation by the government (or its agent) in foreign trade including those trading activities in which the government (or its agent) holds title to export before transactions and acquires titles to import.

The main objective of state trading is to facilitate development of trade with countries where trade is in government hand, and to assist the government in solving difficulties and problems for which private trading channels are found to be inadequate. State trading enables the private trading countries to negotiate with equal bargaining power and, thus, safeguard against exploitations, which a large number of private importers and exporters competing with each other, are confronted with monopolistic trading agency. Benefits of State Trading State trading has various advantages as compared with private trading. Firstly, it is an important instrument of export promotion, by removing malpractices of the private exporters; it helps in building reputation of the country's exports. Secondly, with its vast initial investment, it tries to develop new markets for exports and new sources of supply of imports and also promotes exports of non-traditional items. Thirdly, state trading helps the state in honouring its bilateral agreements. Fourthly, it can be directed to patronize national banking, shipping and insurance for encouraging the development of these services. Fifthly, it undertakes bulk- buying and so lowers the cost of imports, dispenses with the services of middlemen and thereby eliminates their commissions. Sixthly, it can be used to take advantage of monopoly power in respect of commodities for which the country holds a world monopoly. It can charge maximum price, which the consumers abroad are ready to pay for such commodities. Seventhly, it is an important instrument in regulating exports and imports for various reasons, viz., to rectify disequilibrium in balance of payments, to restrict imports of non-essential goods, and to provide protection to domestic industries.

Types of State Trading: 1. Partial State Trading: Here, private traders and government coexist. Traders are free to buy and well in the market the government may place some restrictions on them, such as declaration of stocks. Limits on stocks which can be held at a point of time and submission of regular accounts. The government enters the market for purchase of commodities directly from producers at notified procurement price. It undertakes the distribution of commodities to consumers to consumers through a network of price shops. 2. Complete Shops: The purchase and sale of commodities is undertaken entirely by the government or its agencies. Private traders are not allowed to enter the market for purchase or sale. In India, complete wholesale trade in wheat was taken over by the government in 1973; but it had to be given very soon. State Trading was initially taken up by the food department in the state and central government. In Jan 1965, the FCI was set up to undertake the purchase, storage movement, transport, distribution and sale of foodgrains. Objectives of State Trading =To make available supplies of essential commodities to consumers at reasonable prices on a regular basis. =To ensure a fair price of the produce to the farmers so that there may be an adequate incentive to increase production. =To minimise violent price fluctuations occurring as a result of seasonal variations in supply and demand. =To arrange for supply of such as fertilizers and insecticides.

=To undertake the procurement and maintenance of buffer stock and their distribution whenever and wherever necessary. =To arrange for storage, transportation, packaging and processing. =To check hoarding, black marketing and profiteering. State Trading Corporation of India The S. T. C. has been constituted as a limited liability company under the Indian Company's Act, 1956. It normally has 10 Directors. As per its Memorandum of Association the objectives of the S. T. C. are, to organise and effect exports from and imports in to India of all such goods and commodities as may be determined by the Company from time to time, and to undertake the purchase, sale and transport of and the general trade in such goods and commodities in India or anywhere else in the world. Functions: With the passage of time, the role and activities of the Corporation have widened. Besides, the above objective, other important objectives are: 1. To explore new markets for traditional items of export and develop new items with a view to diversifying and expanding the export trade; 2. To undertake import and/or internal distribution of commodities in short supply with a view to stabilizing prices and rationalising distribution; 3. To generally implement such arrangements for import, export trade, and/or distribution of particular commodities as the Union government may specify in the public interest; 4. To barter, exchange, pledge, manipulate, treat, prepare and deal in merchandise, commodities and articles of all kinds and to carry on any kind of commercial and/or financial business as the company may determine from time to time;

5. To hold or assist in holding exhibitions in India and elsewhere of the products and articles in which the company is interested; 6. To manufacture, store, export, import, and deal in all kinds of articles and things, which may be required for the purpose of any business of the company. 7. To promote long-term export operations and "difficult to-sell" items. The Committee on Public Undertakings has classified the above functions of the S T C under the following six main heads:' 1. Exports a) To promote export of traditional items, to introduce non traditional items in the world markets and to find out new markets for Indian exports. b) To facilitate and organise exports of difficult-to-sell items (such as manure, meal, sodium, dichromate, deoiled linseed cake, cement etc.) by linking essential imports with additional exports and under special trade promotion agreements. c) To organise product to meet export demands and to help product units in overcoming difficulties of procuring raw materials and other essential requirements. d) To develop new lines of exports. e) To ensure implementation of trade plans with East European countries. f) To help local producers by procuring reasonable prices and to hold stocks to maintain ultimate production at optimum level of commodities with high export potential, thus, avoiding dislocation in production, maintaining adequate availability for export and ensuring a fair price to local producers. g) To participate in fairs and exhibition abroad so as to create atmosphere for expansion of exports and for introducing new products in foreign markets. 2. Imports

a. b. c. d. e. f. g.

To import capital goods, industrial raw materials and certain scarce commodities required for the economic development of the country. To import items which are canalised by the Government through this Corporation so as to ensure that adequate supplies at the right time and at the economical prices are made and are distributed to the industries and other users in a co-ordinated manner. To undertake import of commodities where bulk purchase would give better terms. To undertake imports from state trading countries or from where monopolies are involved. To import commodities, which is in short supply in the country. To import speculative and high profit margin items with a view, to stabilise the prices and to do distribution of such commodities in an organised manner at fair prices. To ensure the implementation of trade plans with the East European countries and other special agreements.

3. Internal Trade a. To undertake internal trade in certain commodities like imported cars. b. To undertake price support and buffer stock operations with a view to ensure fair prices to the growers of certain agricultural commodities, to stabilize internal production and sustain foreign demand. 4. Trade Promotion Agreements To arrange for essential imports against additional exports of traditional and non-traditional items which are specified in special agreements. 5. Export Aid to Small Industries

To assist the small-scale manufacturers in exporting their products by giving wide publicity to their products abroad and by arranging attractive packing, providing credit facilities, helping them in matters of shipping and exploring possibilities of exporting their products in various countries. 6. Participation in Export-Oriented Corporation To lend increasing support in the form of financial and organisational assistance to specialised export agencies like the Handi-crafts and Handloom Export Corporation. Besides these, S T C had also undertaken price support operations (at the instance of the Central Government) for natural rubber in 1970 and tobacco in 1972. Growers were assured of remunerative prices and surplus quantities, mopped up by the S.T.C., were exported